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Brinker (EAT) Banks on Expansion Plan Amid Delta Variant Woes
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Brinker International, Inc. (EAT - Free Report) is benefiting from its ambitious expansion plans and sales-building initiatives, including streamlining of menu innovation, advertising campaigns and kitchen system optimization.
However, coronavirus-related woes persist. The company continues to anticipate some volatility ahead due to the uncertainty regarding the coronavirus pandemic and economy. This along with a high debt level are concerns. In the past year, shares of Brinker have gained 11.6% compared with the Retail - Restaurants industry’s 20.6% growth.
Factors Driving Growth
Constant Expansion Drives: Brinker is one of the few fast-casual restaurant chains that have been expanding despite sluggish economic development. In fiscal 2018, 2019 and 2020, the company opened 34, 23 and 31 restaurants, respectively, globally. Notably, during fiscal 2021, the company opened 18 new restaurants, including eight company-owned, 10 total franchises. Also, during the fiscal year, the company opened restaurants in six new locations, and entered into two new arrangements, one with an existing franchise partner and one with a new franchise partner. During fiscal 2022, the company expects to open seven company-owned new restaurants and 8-14 franchise-operated restaurants.
Robust Sales-Building Initiatives: Brinker is steadfast in its goal to drive traffic and revenues through a range of sales-building initiatives, such as streamlining of menu and its innovation, strengthening its value proposition, better food presentation, advertising campaigns, kitchen system optimization and introduction of a better service platform. During fiscal 2021, Just Wings surpassed the $150-million target in the company-owned restaurants. Driven by the support of the company’s franchise partners, it's Just Wings became a business worth more than $170 million in the United States. Also, many of international franchisees are now operating the brand. Notably, during fiscal 2021, the company continues with its multi-channel strategies, thereby driving traffic and margins.
Boosting Digital Growth: Brinker is also investing heavily in technology-driven initiatives like online ordering to augment sales and boost guest services. During fiscal 2021, the company implemented technology enhancements to curbside its takeout system, which is already simplifying the operational side of the business and improving guest metrics. Also, during the fiscal year its Just Wings has gone live with a website that offers online ordering for takeout as well as delivery. It is a first virtual brand spreading over 1,000 restaurants by leveraging its technological infrastructure.
Strong Performance of Chili's: Chili’s turn-around strategies yielded positive results with traffic and sales moving in a positive direction. These strategies are focused on simplifying Chili’s core menu by improving recipes, strengthening value proposition with higher-quality ingredients, and new cooking techniques to deliver better food at even more compelling price points. During the fourth quarter of fiscal 2021, comps at Chili's franchised restaurants increased 104.6% versus the 32.2% drop in the year-ago quarter. At international franchised Chili’s restaurants, the same increased 159.1% against the year-ago quarter’s decline of 66.1%. Meanwhile, at the U.S. franchised units, comps increased 84.9% against the year-ago quarter’s decline of 39.9%.
Image Source: Zacks Investment Research
Concerns
The company continues to anticipate some volatility ahead due to uncertainty regarding the coronavirus pandemic and economy. Although the company has reopened all of its dining rooms and spaces (as of Jun 30 2021), it is still witnessing dismal traffic due to capacity limitations. Moreover, due to the uncertainties created by the COVID-19 pandemic and the increasing impact of the delta variant, the company refrained from providing the full guidance for fiscal 2022.
Notably, high debt is a concern for Brinker. The company’s long-term debt as of Jun 30, 2021, totaled $ $917.9 million compared with $1,107 million as on Mar 24, 2021. Also, the company ended the fourth quarter fiscal of 2021 with cash and cash equivalents of $23.9 million compared with $63.6 million at fiscal third-quarter end, which may not be enough to manage a high debt level.
Some better-ranked stocks in the same industry include Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , Jack in the Box Inc. (JACK - Free Report) and Papa John's International, Inc. (PZZA - Free Report) , each carrying a Zacks Rank #2 (Buy).
Dave & Buster's has a three-five-year earnings per share growth rate of 15%.
Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.
Papa John's earnings for 2021 are expected to rise 122.9%.
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Brinker (EAT) Banks on Expansion Plan Amid Delta Variant Woes
Brinker International, Inc. (EAT - Free Report) is benefiting from its ambitious expansion plans and sales-building initiatives, including streamlining of menu innovation, advertising campaigns and kitchen system optimization.
However, coronavirus-related woes persist. The company continues to anticipate some volatility ahead due to the uncertainty regarding the coronavirus pandemic and economy. This along with a high debt level are concerns. In the past year, shares of Brinker have gained 11.6% compared with the Retail - Restaurants industry’s 20.6% growth.
Factors Driving Growth
Constant Expansion Drives: Brinker is one of the few fast-casual restaurant chains that have been expanding despite sluggish economic development. In fiscal 2018, 2019 and 2020, the company opened 34, 23 and 31 restaurants, respectively, globally. Notably, during fiscal 2021, the company opened 18 new restaurants, including eight company-owned, 10 total franchises. Also, during the fiscal year, the company opened restaurants in six new locations, and entered into two new arrangements, one with an existing franchise partner and one with a new franchise partner. During fiscal 2022, the company expects to open seven company-owned new restaurants and 8-14 franchise-operated restaurants.
Robust Sales-Building Initiatives: Brinker is steadfast in its goal to drive traffic and revenues through a range of sales-building initiatives, such as streamlining of menu and its innovation, strengthening its value proposition, better food presentation, advertising campaigns, kitchen system optimization and introduction of a better service platform. During fiscal 2021, Just Wings surpassed the $150-million target in the company-owned restaurants. Driven by the support of the company’s franchise partners, it's Just Wings became a business worth more than $170 million in the United States. Also, many of international franchisees are now operating the brand. Notably, during fiscal 2021, the company continues with its multi-channel strategies, thereby driving traffic and margins.
Boosting Digital Growth: Brinker is also investing heavily in technology-driven initiatives like online ordering to augment sales and boost guest services. During fiscal 2021, the company implemented technology enhancements to curbside its takeout system, which is already simplifying the operational side of the business and improving guest metrics. Also, during the fiscal year its Just Wings has gone live with a website that offers online ordering for takeout as well as delivery. It is a first virtual brand spreading over 1,000 restaurants by leveraging its technological infrastructure.
Strong Performance of Chili's: Chili’s turn-around strategies yielded positive results with traffic and sales moving in a positive direction. These strategies are focused on simplifying Chili’s core menu by improving recipes, strengthening value proposition with higher-quality ingredients, and new cooking techniques to deliver better food at even more compelling price points. During the fourth quarter of fiscal 2021, comps at Chili's franchised restaurants increased 104.6% versus the 32.2% drop in the year-ago quarter. At international franchised Chili’s restaurants, the same increased 159.1% against the year-ago quarter’s decline of 66.1%. Meanwhile, at the U.S. franchised units, comps increased 84.9% against the year-ago quarter’s decline of 39.9%.
Image Source: Zacks Investment Research
Concerns
The company continues to anticipate some volatility ahead due to uncertainty regarding the coronavirus pandemic and economy. Although the company has reopened all of its dining rooms and spaces (as of Jun 30 2021), it is still witnessing dismal traffic due to capacity limitations. Moreover, due to the uncertainties created by the COVID-19 pandemic and the increasing impact of the delta variant, the company refrained from providing the full guidance for fiscal 2022.
Notably, high debt is a concern for Brinker. The company’s long-term debt as of Jun 30, 2021, totaled $ $917.9 million compared with $1,107 million as on Mar 24, 2021. Also, the company ended the fourth quarter fiscal of 2021 with cash and cash equivalents of $23.9 million compared with $63.6 million at fiscal third-quarter end, which may not be enough to manage a high debt level.
Zacks Rank & Key Picks
Currently, Brinker carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same industry include Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , Jack in the Box Inc. (JACK - Free Report) and Papa John's International, Inc. (PZZA - Free Report) , each carrying a Zacks Rank #2 (Buy).
Dave & Buster's has a three-five-year earnings per share growth rate of 15%.
Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.
Papa John's earnings for 2021 are expected to rise 122.9%.