Brinker International Inc.
) fourth-quarter fiscal 2013 adjusted earnings of 77 cents per
share beat the Zacks Consensus Estimate of 74 cents by 4.05% and
the year-ago quarter's earnings of 61 cents by 26.2%. Solid
margins made up for the soft revenues to drive the earnings
growth. Lower share count also boosted earnings significantly
during the quarter.
Quarterly revenues inched up 0.2% year over year to $730.1
million. However, revenues missed the Zacks Consensus Estimate of
$735 million by approximately 0.7%. Brinker witnessed sluggish
sales environment in the quarter. Lower traffic pulled down the
company-owned comparable restaurant sales (comps) by 0.5%, much
less than the year-ago quarter's comps growth of 2.1%.
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).
reported revenues of $615.7 million, down 0.2% year over year due
to a 2.1% drop in traffic and a 0.3% decline in domestic
sales nudged up 0.1% to $93.4 million in the quarter, buoyed by
effective menu pricing (up 0.5%) and positive mix (up 1.1%).
However, comps at Maggiano's inched up only 0.2%, which was lower
than the year-ago quarter's comps of 1.9%. Comps in the quarter
were hurt by a 1.4% decrease in traffic.
Franchise and Other
revenues surged 14.8% to $20.9 million. The rise was mostly due
to the presence of a one-time development fee refund in the
year-ago quarter's results which was absent in the second
quarter. Comparable restaurant sales at franchised restaurants
ascended 1%, aided by 0.5% and 2.3% growth in domestic and
international franchise comps, respectively.
The company's adjusted operating margin expanded 180 basis
points (bps) to 11.6% benefiting from a 60 bps improvement in
restaurant operating margin and lower general and administrative
Restaurant margins at both Chili's and Maggiano's improved
year over year, mainly due to reduced cost of sales.
In fiscal 2013, the company witnessed a 0.9% increase in
revenues to $2.84 billion. Adjusted earnings were $2.34 per
share, up 19.4% year over year. Earnings were also within
management's guidance range of $2.30-$2.45 per share.
During the quarter, Brinker bought back 3.5 million shares
worth $141.6 million. In fiscal 2013, the company repurchased 9.3
million shares at the cost of $333.4 million.
During the quarter, the company acquired 11 restaurants from a
franchisee in Canada. Apart from this, Brinker opened eight
international franchise restaurants. At the end of fiscal 2013,
Brinker operated 1,591 restaurants, of which 1,547 were Chili's
(including domestic and international) and the remaining 44 were
Maggiano's. In fiscal 2014, Brinker expects to open nearly 11 to
12 restaurants under the Chili's brand.
For fiscal 2014, the company expects adjusted earnings per
share in the range of $2.70-$2.85, up 15%-22% year over year. The
company anticipates revenues to grow 3%-4% year over year.
Moreover, management expects comps to increase 1%-2% year over
year in fiscal 2014.
Following the implementation of the point-of-sale back-office
systems and proper waste control management, the company's cost
of sales is expected to improve in fiscal 2014. Restaurant
operating margin is estimated to be up 50 bps-75 bps, driven by
lower labor costs and operational enhancement.
With the help of its 'plan to win' initiative, continued
margin expansion and menu innovation, Brinker has succeeded in
posting double-digit earnings growth in the past three years.
Brinker's sales-driven initiatives including new kitchen
equipment system, effective marketing strategy and integrated
point-of-sale system are expected to reinvigorate its brands,
However, this Zacks Rank #3 (Hold) company is witnessing
declining comps due to frail industry sales trend, which remains
a major headwind.
Some other players in the restaurant industry which look
attractive at the current level include
Yum! Brands Inc.
Buffalo Wild Wings Inc.
Burger King Worldwide, Inc.
). All these companies carry a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
BUFFALO WLD WNG (BWLD): Free Stock Analysis
BRINKER INTL (EAT): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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