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Robust Chili's Performance Aids Brinker (EAT), Inflation Hurts
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Shares of Brinker International, Inc. (EAT - Free Report) are riding high on solid Chili's performance, menu innovation, sales channel expansion and brand-building awareness. As a result, the stock has gained 46.2% in the past six months compared with the industry’s 19.8% growth. However, inflationary pressures remain a major concern.
Growth Drivers
Chili’s turn-around strategies yielded positive results, with traffic and sales moving in the 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.
In the fiscal second quarter, Chili’s revenues increased 8.7% year over year to $878.7 million. The gain was primarily due to increased menu pricing and the acquisition of 68 restaurants in fiscal 2022, marginally overshadowed by lower traffic.
In the quarter, domestic comps at Chilli’s (including company-owned and franchised) rose 7.5% year over year. The company emphasizes on the brand's restaurant development to drive growth.
Then again, Brinker remains 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 the introduction of better service platform.
The Zacks Rank #3 (Hold) company is also focusing on digitalization to drive growth. In fiscal 2022, the company initiated the rollout of two technology systems, particularly for Chili's.
The company implemented a handheld system with a focus on redefining guest services. The system bolsters table coverage and prospects for earning money. The company stated that initial results have been strong, backed by 15% higher server earnings and significant improvements in guest metrics.
EAT initiated a curbside system, thereby capitalizing on increased demand for off-premise dining. With a focus on providing a more seamless guest experience, restaurants with adopted systems have been generating 15 to 20-point improvements in guest metrics. Backed by the promising results of its technological systems, the company intends to strengthen its base to accelerate additional growth vehicles in the upcoming periods.
Image Source: Zacks Investment Research
Concerns
Rise in food and beverage costs, and restaurant labor costs, including wage rates, training and overtime continue to impact the company negatively. Higher repair and maintenance expenses and increased utility expenses are added concerns. Total operating costs and expenses in the fiscal second quarter were $978.3 million compared with $886 million in the year-ago quarter.
The operating margin, as a percentage of company sales, was 11.6% compared with 12.1% reported in the prior-year quarter. The company anticipates inflation to be in the mid-teens in fiscal 2023.
Chuy’s Holdings currently sports a Zacks Rank #1 (Strong Buy). CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of the company have gained 45.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s reported levels.
Arcos Dorados currently flaunts a Zacks Rank #1. ARCO has a long-term earnings growth rate of 7.8%. Shares of the company have declined 7.9% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s reported levels.
Bloomin' Brands flaunts a Zacks Rank #1. BLMN has a long-term earnings growth rate of 12.3%. The stock has risen 20.9% in the past year.
The Zacks Consensus Estimate for Bloomin' Brands’ 2024 sales and EPS suggests growth of 2.4% and 5.5%, respectively, from the year-ago period’s reported levels.
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Robust Chili's Performance Aids Brinker (EAT), Inflation Hurts
Shares of Brinker International, Inc. (EAT - Free Report) are riding high on solid Chili's performance, menu innovation, sales channel expansion and brand-building awareness. As a result, the stock has gained 46.2% in the past six months compared with the industry’s 19.8% growth. However, inflationary pressures remain a major concern.
Growth Drivers
Chili’s turn-around strategies yielded positive results, with traffic and sales moving in the 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.
In the fiscal second quarter, Chili’s revenues increased 8.7% year over year to $878.7 million. The gain was primarily due to increased menu pricing and the acquisition of 68 restaurants in fiscal 2022, marginally overshadowed by lower traffic.
In the quarter, domestic comps at Chilli’s (including company-owned and franchised) rose 7.5% year over year. The company emphasizes on the brand's restaurant development to drive growth.
Then again, Brinker remains 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 the introduction of better service platform.
The Zacks Rank #3 (Hold) company is also focusing on digitalization to drive growth. In fiscal 2022, the company initiated the rollout of two technology systems, particularly for Chili's.
The company implemented a handheld system with a focus on redefining guest services. The system bolsters table coverage and prospects for earning money. The company stated that initial results have been strong, backed by 15% higher server earnings and significant improvements in guest metrics.
EAT initiated a curbside system, thereby capitalizing on increased demand for off-premise dining. With a focus on providing a more seamless guest experience, restaurants with adopted systems have been generating 15 to 20-point improvements in guest metrics. Backed by the promising results of its technological systems, the company intends to strengthen its base to accelerate additional growth vehicles in the upcoming periods.
Image Source: Zacks Investment Research
Concerns
Rise in food and beverage costs, and restaurant labor costs, including wage rates, training and overtime continue to impact the company negatively. Higher repair and maintenance expenses and increased utility expenses are added concerns. Total operating costs and expenses in the fiscal second quarter were $978.3 million compared with $886 million in the year-ago quarter.
The operating margin, as a percentage of company sales, was 11.6% compared with 12.1% reported in the prior-year quarter. The company anticipates inflation to be in the mid-teens in fiscal 2023.
Key Picks
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Chuy's Holdings, Inc. (CHUY - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Bloomin' Brands, Inc. (BLMN - Free Report) .
Chuy’s Holdings currently sports a Zacks Rank #1 (Strong Buy). CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of the company have gained 45.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s reported levels.
Arcos Dorados currently flaunts a Zacks Rank #1. ARCO has a long-term earnings growth rate of 7.8%. Shares of the company have declined 7.9% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s reported levels.
Bloomin' Brands flaunts a Zacks Rank #1. BLMN has a long-term earnings growth rate of 12.3%. The stock has risen 20.9% in the past year.
The Zacks Consensus Estimate for Bloomin' Brands’ 2024 sales and EPS suggests growth of 2.4% and 5.5%, respectively, from the year-ago period’s reported levels.