Brinker's Q1 2026: Contradictions Emerge on Menu Renovation, Traffic Growth, and Advertising Spend

Business Commentary:

* Revenue and Sales Growth: - Brinker International reported total revenues of $1.35 billion for Q1 FY2026, up 18.5% over the prior year. - Growth was driven by strong performance at Chili's, which saw same-store sales increase by 21.4%, with a focus on consistent value messaging and menu innovation.

• Consumer Behavior and Market Share:
• Chili's experienced increased traffic of 13% compared to the previous year, widening its lead over industry peers.

• This trend was supported by effectively targeting different income cohorts, particularly households with income under $60,000, through value positioning and marketing efforts.

• Menu Innovation and Consumer Engagement:

• Chili's ribs upgrade resulted in a 35% increase in sales, and the frozen Patrón Margarita platform saw a significant increase in unit sales.

• These innovations, along with effective marketing strategies and guest engagement, contributed to enhanced consumer engagement and sales growth.

• Labor and Cost Management:

• The company's restaurant operating margin improved by 270 basis points year-over-year, primarily driven by sales leverage and favorable labor cost management.
• This improvement was supported by strategic decisions to invest in labor and wage rate inflation, offsetting some challenges from increased food and beverage costs.

Contradiction Point 1

Menu Renovation Strategy

It highlights differences in the approach to menu renovation, which impacts product offerings and consumer engagement.

What complexities and additional labor requirements arise from changes in cooking platforms? - John Ivankoe (JPMorgan Chase & Co)

2026Q1: We're looking at adding flame back to the building with charbroilers, which could change operations. There's no major equipment investment, but potential labor deployment changes need testing to ensure smooth operation. - Kevin Hochman(CEO)

Can you explain how the Core 4's evolution supports maintaining sales volumes as other menu items expand? - Brian Mullan (Piper Sandler & Co.)

2025Q4: We still have the opportunity to make more impact with menu. The menu renovation plan is really deep because we have a lot of opportunity to bring more sales in and make the menu more modern. - Kevin Hochman(CEO)

Contradiction Point 2

Traffic Growth Expectations

It involves differing expectations for traffic growth, which affects sales projections and business strategy.

How will same-store sales normalize across Q2, Q3, and Q4? - Jeffrey Farmer (Gordon Haskett Research Advisors)

2026Q1: Once we lap the peak in November, mid-single-digit average growth is expected for Q3 and Q4. Q2 could be slightly higher due to holiday shifts. - Mika Ware(CFO)

What are the expectations for Chili's same-store sales components in fiscal 2026? - Jeffrey Daniel Farmer (Gordon Haskett Research Advisors)

2025Q4: The plan is for mid-single-digit same-store sales growth, driven by a 3-5% pricing strategy, flat mix expected with any upside from continued positive traffic. - Michaela M. Ware(CFO)

Contradiction Point 3

Advertising Spend

It involves changes in advertising spending, which impacts marketing strategy and financial forecasts.

Have there been any changes in advertising spend expectations? - Jon Tower (Citigroup Inc.)

2026Q1: Advertising remains at 2.5% of sales, with an increase expected in Q2. - Mika Ware(CFO)

How do you expect fiscal 2026 comp sales to perform? Are there strategies in place to ensure positive comps each quarter? - Jeffrey Andrew Bernstein (Barclays Bank PLC)

2025Q4: Advertising spend in Q1 will be 3.5% of sales or higher. - Michaela M. Ware(CFO)

Contradiction Point 4

Consumer Spending and Economic Uncertainty

The company's stance on consumer spending and economic uncertainty has evolved, which can impact business strategy and financial projections.

Has slowing consumer spending affected Chili's performance? - Jeffrey Bernstein (Barclays Bank PLC, Research Division)

2026Q1: We haven't seen a slowdown in discretionary spending at Chili's. Our value positioning is strong, and we're benefiting from consistent experience and messaging. - Kevin Hochman(CEO)

How will Brinker sustain positive comps amid challenging FY2Q comparisons? What key initiatives support this confidence? - David Palmer (Evercore ISI)

2025Q3: We are aware of a slight slowdown in spending among lower-income families as they are more sensitive to economic conditions. But that's spread across all dayparts and all our segments. And we're seeing that slowdown. - Kevin Hochman(CEO)

Contradiction Point 5

Digital Loyalty and Consumer Engagement

It highlights differing strategies and priorities regarding the development of digital loyalty programs and consumer engagement, which are crucial for customer retention and growth.

How will Chili's use tokenized consumer data to enhance consumer engagement or drive growth? - Christopher O'Cull (Stifel, Nicolaus & Company, Incorporated)

2026Q1: We're starting to understand how to use token data better to track monthly guest cohorts and their visit frequency. This helps quantify the impact of investments and initiatives. - Kevin Hochman(CEO)

What are the next steps in the digital journey and consumer insights, and how does loyalty integrate into this? - Christine Cho (Goldman Sachs)

2025Q2: We'll improve the data mining capabilities in-house, and we'll simplify the loyalty program to enhance the guest experience before expanding it. - Kevin Hochman(CEO)