Brinker shares slide 7% in pre-market following mixed round of results

Brinker International, the parent company of Chili's and Maggiano's, reported strong Q4 earnings that exceeded revenue expectations but slightly missed on earnings per share (EPS). The company posted an adjusted EPS of $1.61, which was higher than last year’s $1.39 but fell short of the FactSet Consensus estimate of $1.68. However, revenue came in at $1.21 billion, a 12% year-over-year increase, surpassing the analyst expectation of $1.16 billion. This solid revenue growth was driven by significant gains in comparable restaurant sales, particularly at Chili's.

Breaking down the performance by segment, Chili's led the way with a remarkable 14.8% increase in comparable restaurant sales, well above the 8.26% expected by analysts. This growth was primarily due to higher menu prices and increased traffic, bolstered by successful promotions like the "Big Smasher" burger and strong advertising campaigns. On the other hand, Maggiano's saw a more modest 2.5% increase in comparable sales, slightly below the 2.72% expected, reflecting lower traffic partially offset by favorable menu pricing and mix.

Chili's domestic operations outperformed, with domestic comparable restaurant sales rising 14.5% year-over-year. However, international operations were weaker, with a mere 0.5% increase, significantly missing the 5.87% estimate. Meanwhile, Chili's franchise comparable restaurant sales grew by 4.1%, below the 5.76% expected, indicating some challenges in the franchised locations. The company also reported a healthy restaurant operating margin (non-GAAP) of 15.2%, consistent with expectations and an improvement from the 13.4% margin last year, driven by sales leverage despite higher labor and maintenance costs.

Maggiano's sales increased due to favorable menu pricing, but the segment faced pressure from declining traffic. Company restaurant expenses for Maggiano's also rose slightly as a percentage of sales due to higher repairs, maintenance, and advertising costs. Despite these challenges, both segments contributed to Brinker’s overall strong performance in Q4.

Looking ahead, Brinker provided guidance for fiscal year 2025, expecting total revenues to range between $4.55 billion and $4.62 billion. The company projects net income per diluted share, excluding special items, to be between $4.35 and $4.75. Capital expenditures are anticipated to be in the range of $195 million to $215 million, reflecting continued investment in the business to sustain growth. The company also highlighted its strong balance sheet, ending fiscal 2024 with no outstanding borrowings on its $900 million revolving credit facility and $64.6 million in cash. The outlook was mixed with EPS below consensus while revenues outpaced analyst expectations.

Overall, Brinker International’s Q4 results reflect solid execution, particularly at Chili's, which saw significant traffic and sales growth. While Maggiano's and international operations faced some challenges, the overall strong revenue growth and margin improvements position the company well for continued success in fiscal 2025. The provided guidance suggests confidence in maintaining this momentum, supported by ongoing investments in the business and favorable market conditions.