Brinker International Exceeds Q2 Earnings Expectations Amid Strong Same-Store Sales Growth and Margin Improvements

Brinker International reported Q2 FY2025 results exceeding Wall Street expectations, driven by strong same-store sales growth at Chili's and improved restaurant operating margins. CEO Kevin Hochman credited menu simplification, operational investments, and upgraded kitchen equipment for enhanced food quality and guest experience. Analyst questions focused on margin expansion drivers, Maggiano's turnaround, long-term growth targets, marketing spend efficiency, traffic, pricing, and mix assumptions, store remodel plans, and new unit growth opportunities.

Brinker International (NYSE: EAT) delivered Q2 FY2025 results that surpassed Wall Street's expectations, driven by strong same-store sales growth at Chili's and improved restaurant operating margins. The company's CEO, Kevin Hochman, attributed these results to ongoing menu simplification, targeted operational investments, and upgraded kitchen equipment, which enhanced food quality and guest experience [1].

Chili's same-store sales rose by 19.8% year-on-year, while the company's adjusted EPS of $2.49 beat analyst estimates by 0.8%. The adjusted EBITDA of $212.4 million also exceeded expectations by 1.7%. The company's operating margin improved to 9.8% from 6.1% in the same quarter last year [2].

Analysts focused on various aspects of the company's performance. David Palmer from Evercore ISI asked about margin expansion drivers and Maggiano's turnaround. CFO Mika Ware clarified that margin expansion is guided at 30-40 basis points, with investments planned in food and labor. CEO Kevin Hochman described the Maggiano's strategy as applying Chili's successful fundamentals [2].

Chris O'Cull from Stifel inquired about updating long-term growth targets and marketing spend efficiency. Ware reiterated existing growth algorithms remain relevant for now, while Hochman said incremental marketing investment would focus on smaller, high-impact adjustments [2].

Jeff Farmer from Gordon Haskett questioned traffic, pricing, and mix assumptions in guidance. Ware outlined a more modest pricing approach, with mix expected to be flat and positive traffic as a key focus, even as year-on-year comparisons become tougher [2].

Christine Cho from Goldman Sachs asked for details on store remodel plans and anticipated returns. Ware explained four pilot remodels are underway, with broader rollout and investment levels to be determined after evaluating initial results [2].

Brian Harbour from Morgan Stanley probed opportunities for new unit growth and market expansion. Ware noted the strongest historical performance in Texas, Florida, and California but highlighted opportunities in the Northeast and Pacific Northwest as part of the company's expansion strategy [2].

Looking ahead, Brinker International guided for revenues of $5.6 billion to $5.7 billion in FY2026, adjusted EPS of $9.90 to $10.50, and capex of $270 million to $290 million in FY2026. The company expects continued same-store sales gains each quarter at Chili's despite tough comparisons [1].

References:
[1] https://www.aol.com/finance/brinker-sales-pass-5-billion-152201880.html
[2] https://finance.yahoo.com/news/5-most-interesting-analyst-questions-053053929.html