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Brinker International Inc. (EAT) reported adjusted earnings per share of 30 cents in the first quarter of 2012, surpassing the Zacks Consensus Estimate by 3 cents. Earnings were also ahead of 21 cents reported in the prior-year quarter.

On a GAAP basis, the owner of Chili’s Grill & Bar and Maggiano's Little Italy reported first quarter earnings of 28 cents per share versus 21 cents per share posted in the year-ago quarter.

Total revenue jumped 2.1% year over year to $668.4 million due to a 2.0% increase in systemwide comparable restaurants sales. However, the quarterly revenue missed the Zacks Consensus Estimate of $671 million.

Quarter Performance

Chili's Grill & Bar restaurant reported total revenue of $566.9 million, up 1.6% year over year while Maggiano's sales were $85.3 million in the quarter. Royal and franchise revenue increased 5.2% to $16.2 million, driven by year-over-year unit growth of 25 additional international restaurants.

Comparable restaurant sales at Chili's Grill & Bar restaurant spiked 1.7% benefiting from a 1.9% rise in traffic and 1.3% hike in menu price. Same-restaurant sales at Maggiano's leaped 3.5% driven by higher traffic (up 2.1%) and menu price increase (up 1.8%).

Comparable restaurant sales at franchised domestic restaurants and franchised international restaurants grew 0.2% and 7.5%, respectively.

Restaurant operating margin enhanced 80 basis points (bps) year over year to 15.8%. Margins at Chili’s expanded due to labor savings initiatives and sales leverage on fixed costs related to higher revenue. Restaurant margin at Maggiano's improved mainly on decreased restaurant labor and restaurant expense.

The Dallas-based restaurant company reported adjusted tax rate of 30.2% during the quarter compared with 27.9% in the first quarter of 2011.

Financial Position

At quarter end, the company had current assets of $185.6 million and shareholders’ equity of $378.7 million. During the first quarter, the company repurchased 3.2 million shares for approximately $75.0 million.

Outlook

Brinker reaffirmed its adjusted earnings guidance range of $1.80 to $1.95 for fiscal 2012. The company continues to expect full-year revenues and comparable-restaurant sales to increase 2–3% year over year.

Capital expenditure is estimated between $155 and $165 million for 2012.

Unit Update

At the end of the first quarter, Brinker operated 1,578 restaurants, of which 1,293 were Chili’s, 44 were Maggiano's and 241 international. In the international market, the company operates 240 Chili’s restaurants and one Maggiano’s restaurant.

Our Take

Brinker remains on track to double its EPS by 2015, driven by margin expansion through disciplined cost management and third consecutive quarter of positive sales and traffic growth. Additionally, the company is boosting shareholder value through share repurchases as well as dividend payment. However, stiff competition and food cost inflation are expected to remain headwinds for the company.

Brinker currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

One of the peers of Brinker, Domino's Pizza Inc. (DPZ) reported third quarter 2011 adjusted earnings of 35 cents per share, which outpaced the Zacks Consensus Estimate by 2 cents and the year-ago quarter adjusted earnings by 8 cents.

Source: Brinker Reports Mixed Results