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Brinker (EAT) Q1 Earnings and Revenues Surpass Estimates

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Brinker International, Inc. (EAT) reported first-quarter fiscal 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. While the bottom line beat the consensus estimate for the fourth straight quarter, the top line outpaced the same for third consecutive quarter. However, both the metrics declined year over year.

Following the release, CEO and president, Wyman Roberts said, “We continue to deliver impressive results, returning to positive earnings in the first quarter.”

Earnings & Revenue Discussion

The company reported adjusted earnings per share of 28 cents, which compares favorably with the Zacks Consensus Estimate of a loss of 18 cents. Notably, Brinker had reported adjusted earnings of 41 cents in the year-ago quarter.

Quarterly revenues of $740.1 million beat the consensus mark of $733. However, the top line declined 5.8% on a year-over-year basis. Notably, the downside can primarily be attributed to the COVID-19 pandemic, which negatively impacted the dining room sales. This was partially mitigated by the acquisition of 116 Chili's restaurants in first-quarter fiscal 2020 and an increase in off-premise sales.

Brand Performances

Brinker primarily engages in ownership, operation, development and franchising of various restaurant brands under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s).

Chili's

Chili’s revenues in the fiscal first quarter fell 1.3% year over year to $686.5 million, primarily due to lower traffic and dismal dining room sales. However, this was partly offset by the buyout of 116 Chili's restaurants (during first-quarter fiscal 2020) and increased off-premise sales.

Chili's company restaurant expenses (as a percentage of company sales) in the fiscal first quarter declined to 87.5% year over year compared with 88% in the prior-year quarter. The downside can primarily be attributed to lower advertising expenses, decline in manager and hourly labor expenses, and reduced repairs and maintenance expenses. This was marginally negated by sales deleverage and increase in expenses primarily related to delivery fees.

In first-quarter fiscal 2021, company-owned comps declined 7.2% from the prior-year quarter.

Comps at Chili's franchised restaurants declined 11.5% compared with 0.3% fall in the year-ago quarter. At international franchised Chili’s restaurants, the same fell 21.9% compared with the year-ago quarter’s decline of 1.3%. Meanwhile, at the U.S. franchised units, comps declined 5.6% against the year-ago quarter’s growth of 0.4%.

At Chili's, domestic comps (including company-owned and franchised) fell 7% versus the prior-year quarter’s increase of 2.3%.

Brinker International, Inc. Price, Consensus and EPS Surprise Brinker International, Inc. Price, Consensus and EPS Surprise

Brinker International, Inc. price-consensus-eps-surprise-chart | Brinker International, Inc. Quote

Maggiano's

Maggiano's sales fell 40.7% year over year to $53.6 million primarily due to lower dining sales on account of COVID-19. However, this was partially offset by increased off-premise sales. Comps plunged 38.6% year over year.

Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal first quarter soared 100.2% year over year compared with the prior-year quarter’s 96.2%. The increase was primarily led by sales deleverage and high expenses related to delivery fees and supplies. However, these were partially negated by lower advertising, labor, repairs and maintenance expenses, better menu item mix, lower utilities expenses and favorable menu pricing.

Operating Results

Total operating costs and expenses declined to $715.7 million from $754.8 million in the year-ago quarter. Moreover, restaurant operating margin — as a percentage of company sales — was 11.6% compared with 11% in the prior-year quarter.

Balance Sheet

As of Sep 23, 2020, cash and cash equivalents amounted to $58.8 million compared with $29 million as on Sep 25, 2019.

Long-term debt was $1,158.3 million as of Sep 23, 2020, compared with $1,208.5 million on Jun 24, 2020. Total shareholders’ deficit in the reported quarter came in at ($465.1) million compared with ($479.1) million as of Jun 24, 2020.

Q2 Outlook

For second-quarter fiscal 2021, adjusted net earnings per share are expected in the range of 40 cents to 60 cents. The Zacks Consensus Estimate for the same is currently pegged at earnings of 38 per share. Comparable restaurant sales are expected to be in the negative mid-single digit range.

Zacks Rank & Other Key Picks

Currently, Brinker, which shares space with  Jack in the Box Inc. (JACK - Free Report) , flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks, which warrant a look in the same space include Dine Brands Global, Inc. (DIN - Free Report) and Fiesta Restaurant Group, Inc. (FRGI - Free Report) , each sporting a Zacks Rank #1.

Dine Brands Global has reported better-than-expected earnings in all of the trailing four quarter, with average being 32.9%.

Fiesta Restaurant anticipates 2021 earnings to surge 260.7%.

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