Brinker International Inc. ( EAT ) recently reported
third-quarter fiscal 2013 adjusted earnings of 72 cents per share,
beating the Zacks Consensus Estimate by 4.3%. The earnings were
also up 20% from the year-ago quarter, driven by the company's
higher margins and "Plan to Win" initiative.
Quarterly revenues remained nearly flat year over year to $742.8
million. However, revenues missed the Zacks Consensus Estimate by
approximately 1%. Brinker has witnessed a sluggish sales
environment with negative company-owned comparable restaurant sales
(comps) of 0.9% during the quarter. Comps in the quarter were
affected by a 2.9% decline in traffic offsetting 1.5% rise in
pricing and 0.5% improvement in mix-shift.
Brinker has also witnessed a 0.2% decline in system-wide comps
as compared with a 4.2% rise in the same in the year-ago
Behind the Headline Numbers
Brinker International primarily engages in the ownership,
operation, development and franchising of various restaurant brands
under the names of Chili's Grill & Bar (Chili's) and Maggiano's
Little Italy (Maggiano's).
Chili's reported revenues of $632.6 million,
down 0.7% year over year due to a 3.2% drop in traffic. Comps at
Chili's Grill & Bar restaurant declined 1.1%.
Maggiano's sales nudged up 0.2% to $92.1
million in the quarter, buoyed by a 1.6% increase in pricing. Comps
at Maggiano's inched up only 0.4% as compared with 3.9% in the
year-ago period. Comps in the quarter were hurt by 0.2% fall in
mix-shift and 1% decrease in menu price.
Franchise and Other revenues surged 38.2% to
$18.1 million. Comps at franchised restaurants were up 1.3%, aided
by a 5.1% growth in international franchise comps, partially offset
by a 0.3% decline in domestic franchise comps.
Brinker's restaurant operating margin expanded 70 basis points
(bps) to 17.9% benefiting from increased margins in its two
segments. Restaurant margins at Chili's and Maggiano's also
improved year over year, mainly due to reduced cost of sales.
Share Repurchase & Dividend
During the quarter, Brinker bought-back 1.8 million shares worth
$60.4 million. In addition, Brinker also paid its regular quarterly
dividend of 20 cents per share during the third quarter.
During the quarter, Brinker opened two international franchise
restaurants while it has closed five franchised and two
company-owned Chili's units. At the end of the quarter, Brinker
operated 1,588 restaurants, of which 865 were company-owned and the
rest were franchised.
Brinker has maintained its guidance for fiscal 2013. The company
expects adjusted earnings per share in the range of $2.30-$2.45, up
17% to 25% year over year. The targeted growth is expected to come
from 2%-3% comps growth, operating margin improvement of 100 bps
and share count reduction of approximately 6%. Diluted weighted
average shares outstanding are projected between 74 to 76 million
in fiscal 2013.
Despite a slowdown in the restaurant industry, management
expects comps to increase 2%-3% year over year in fiscal 2013 with
a price increase of 1% to 2% at Chili's.
Franchise revenues are expected to increase in the mid
single-digit range, benefiting from the expansion of the restaurant
Brinker expects to open nearly 32 to 37 international franchise
restaurants in fiscal 2013 with two new restaurants under the
Chili's brand. Along with this, Brinker is expected to complete the
remodeling of 370 company-owned restaurants by the end of fiscal
Dallas-based restaurant chain is witnessing declining comps due
to frail industry sales. Along with this, food cost inflation is
expected to remain headwind for the company. However, Brinker's
various sales-driven initiatives and remodeling program are going
to spur growth, moving ahead. Management expects the re-imaged
units to contribute about 1% of comps growth during 2013.
Another restaurateur McDonald's Corporation 's
( MCD )
first-quarter 2013 earnings of $1.26 per share missed the Zacks
Consensus Estimate by a penny but grew 2% year over year.
Brinker currently carries a Zacks Rank #3 (Hold). Some other
restaurateurs, BJ's Restaurants, Inc. ( BJRI ) and The
Wendy's Co. ( WEN ) are expected to
report their first-quarter earnings on Apr 25 and May 8,
respectively.BJ'S RESTAURANT (BJRI): Free Stock Analysis
ReportBRINKER INTL (EAT): Free Stock Analysis ReportMCDONALDS CORP (MCD): Free Stock Analysis
ReportWENDYS CO/THE (WEN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment