Brinker International, Inc. (EAT) Earnings & Analysis

Latest quarter

Brinker reported Q1 FY2027 revenue of $1.5 billion, above the $1.4 billion consensus. Adjusted earnings per share were $2.77, exceeding the consensus estimate of $2.49.

Revenue rose from $1.3 billion a year earlier. In its filing, Brinker attributed a 10.5% increase in Chili’s total revenue primarily to higher traffic and menu pricing at comparable restaurants. Maggiano’s total revenue fell 4.6%, primarily because of lower comparable-restaurant traffic, partly offset by menu pricing.

Brinker’s gross margin increased to 18.5% from 17.0%, while operating margin rose to 10.2% from 8.74%. The filing said restaurant labor and other restaurant expenses benefited from sales leverage, while higher meat and seafood costs weighed on food and beverage costs.

Free cash flow increased to $105.7 million from $62.4 million. Brinker said operating cash flow rose as operating income increased and payments of performance-based compensation decreased, partly offset by the timing of other receipts and payments.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Kevin Hochman said Chili’s first-quarter same-store sales rose 10%, driven by a 6% increase in traffic. He attributed demand in part to the Big Crispy Chicken sandwich, saying restaurants maintained sales of 55 sandwiches per restaurant per day from the preceding quarter. Hochman also said improvements to food, service and value were intended to bring guests back.

Asked about consumer conditions, Hochman said guests were under pressure from gas prices and interest rates. He said Brinker had seen “a little bit of mix slippage,” which he associated with that pressure. Mika Ware added that first-quarter mix was flat but turned a little negative in October, with some guests managing their checks by spending less on alcohol and desserts.

On competition, Hochman said errors in industry check-average benchmarks meant Chili’s price advantage was narrower than previously reported, although its average remained below the competition. He also said restaurant execution mattered alongside social media: guests needed to find the experience they saw online when they visited.

Analysts asked about inflation and margins. Ware said oil-price and freight pressures were included in guidance, with about $7 million in expectations, mostly in restaurant expenses. She expects restaurant-level margin to be roughly flat year over year in the second quarter, with possible labor pressure as Brinker invests in staffing. For the full year, she expects 70 to 90 basis points of restaurant-level margin improvement, including the 53rd week.

Hochman said Maggiano’s had restaffed banquet sales managers and streamlined banquet operations; banquet sales rose 11% in the quarter. He also described a test of Chili’s kitchen technology at Maggiano’s to address food temperature, speed and coordination. Asked about service times, he said the decrease in ticket time was not significant enough to report.

For the quarter ahead, Hochman expects a mid-single-digit Chili’s comparable-sales increase. Ware said the same mid-single-digit expectation, with positive traffic, applies to the remaining quarters.

Guidance

In its results release, Brinker raised its fiscal 2027 total revenue outlook to $6.23 - $6.33 billion from $6.15 - $6.27 billion. The company also raised its forecast for non-GAAP diluted earnings per share excluding special items to $13.30 - $13.90 from $12.60 - $13.40.