Brinker Misses Zacks Estimate - Analyst Blog

Brinker International, Inc. (EAT), the operator of Chili’s Grill & Bar and Maggiano’s restaurants, recently posted lower-than-expected third-quarter 2010 results hurt by adverse weather conditions and costs related to the roll-out of new Chili’s menu.

The quarterly earnings of 37 cents a share, excluding special items and net income from On The Border Mexican Grill & Cantina, fell short of the Zacks Consensus Estimate of 41 cents, and dropped 7.5% from 40 cents posted in the prior-year quarter.

However, including the results of On The Border but excluding special items, earnings came in at 42 cents a share down 6.7% year-over-year, but was in line with Brinker’s previously provided earnings guidance range of 41 cents to 44 cents.

Management now projects fiscal 2010 earnings, excluding special items and net income from On The Border, between $1.20 and $1.24 per share, and fourth-quarter earnings in the range of 45 cents to 49 cents.

On a reported basis, Brinker earned 39 cents a share, up 14.7% from 34 cents delivered in the year-earlier quarter.

Based in Dallas, Texas, Brinker said that total revenue slipped 7.8% to $713.4 million reflecting a 4.2% decline in comparable restaurant sales and a 5.3% fall in restaurant capacity following the sale of 21 restaurants to a franchisee and closure of 19 restaurants, since third-quarter 2009. Adverse weather negatively impacted comps by about 90 basis points.

Brinker now expects comparable-store sales for fiscal 2010 between 1% and 2%, an improvement over the 2% to 4% decline forecasted earlier. By restaurant concepts, comps fell 5% at Chili’s Grill & Bar but rose 1.9% at Maggiano’s helped by improving traffic.

Casual dining segment remains highly competitive with restaurant operators offering discounts in order to drive traffic. Other operators in the segment are Red Robin Gourmet Burgers Inc. (RRGB) and Ruby Tuesday Inc. (RT).

During the quarter, one company-owned and 8 franchise restaurants were opened (or acquired), and 12 company-owned and five franchise restaurants were closed (or sold).

At the end of third-quarter 2010, Brinker either owned, operated, or franchised 1,704 restaurants under Chili’s Grill & Bar (1,499 restaurants), On The Border (160 restaurants) and Maggiano’s (45 restaurants).

Brinker recently declared that it has agreed to sell its On The Border Mexican Grill & Cantina brand to OTB Acquisition, an affiliate of San Francisco-based private equity firm Golden Gate Capital for $180 million. The transaction will close by fiscal-end 2010. Earlier, Brinker had partly sold the Macaroni Grill restaurants to Golden Gate Capital for $88 million and retained a minority stake of nearly 20%.