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Brinker International, Inc. ( EAT - Analyst Report ) , the operator of Chili's Grill & Bar, On The Border and Maggiano's restaurants, recently reported first quarter 2010 results, registering a double-digit decline in both top and bottom lines. Despite lower operating expenses, fall in interest expense and lower effective tax rate, adjusted net profit for the quarter dropped 15% year-on-year to $17.5 million on account of fall in revenue.
Total revenue slipped 21% to $778.1 million due to a 6% decline in comparable restaurant sales and an 18.6% fall in restaurant capacity due to the sale of 198 restaurants and the closing of 49 restaurants since the first-quarter 2009. In the second-quarter 2009, Brinker sold the Macaroni Grill restaurants (which were 189 of the total restaurants sold) to a private-equity firm Golden Gate Capital for $88 million, keeping a minority stake of nearly 20%.
Brinker’s quarterly earnings of 17 cents a share surpassed the Zacks Consensus Estimate of 15 cents but dipped 15% from 20 cents posted in the prior-year quarter. On a reported basis, including one-time items, quarterly earnings came in at 15 cents a share, down 34.8% from 23 cents reported in the year-ago quarter.
Cost of sales, as a percentage of total revenue, narrowed 20 basis points to 28.2% due to menu changes and price increase, partially offset by higher commodity prices related to dairy, chicken and beef. Restaurant expenses shrank 30 basis points to 58.5% driven by lower utility and restaurant-opening expenses, partly offset by rise in labor costs.
Restaurants in the casual dining segment are experiencing sagging comps and declining traffic with cash strapped consumers shifting to low-priced dining options or eating at home.Other operators in the segment are Darden Restaurants Inc. ( DRI - Analyst Report ) , Red Robin Gourmet Burgers Inc. ( RRGB - Analyst Report ) and Luby’s, Inc. ( LUB - Snapshot Report ) .
By restaurant concepts, comps fell 6% at Chili's Grill & Bar, 5.1% at On The Border and 6.6% at Maggiano's. During the quarter, 12 franchise restaurants were opened, and one company-owned and one franchise restaurants were closed. During fiscal year 2010, Brinker expects to open 2 company-owned restaurants and 44 to 54 franchise restaurants.
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