Brinker International, Inc. (EAT), the operator of Chili’s Grill & Bar, On The Border and Maggiano’s restaurants, recently reported second-quarter 2010 results that topped Zacks’ expectations, sending shares up 12.7% or $1.95 to close at $17.26 on Wednesday, despite the high teens fall registered in the top-line. The stock is up another 1.5% on Thursday.
Brinker’s quarterly earnings of 29 cents a share outdid the Zacks Consensus Estimate of 22 cents, and climbed 7.4% from 27 cents posted in the prior-year quarter. On a reported basis, including one-time items, quarterly earnings came in at 18 cents a share, significantly up from a loss of 21 cents delivered in the year-earlier quarter.
In the prior-year quarter, Brinker had sold its Macaroni Grill restaurants to private-equity firm Golden Gate Capital for $88 million, and retained a minority stake of nearly 20%.
Based in Dallas, Texas, Brinker said that lower cost of sales (down 15.7%), restaurant expenses (down 20.5%), general and administrative expenses (down 15.3%), and fall in interest expense (down 35.3%) helped net profit for the quarter to rise 7.9% year-on-year to $30.1 million.
Total revenue slipped 17.6% to $781.9 million reflecting a 3.1% decline in comparable restaurant sales and a 17.7% fall in restaurant capacity following the sale of 189 Macaroni Grill restaurants, the closing of 47 restaurants, and the sale of 21 restaurants to franchisees since the second quarter of 2009.
Restaurants in the casual dining segment are experiencing sagging comps and declining traffic with cash-strapped consumers shifting to low-priced dining options or eating at home. Other operators in the segment are Darden Restaurants Inc. (DRI), Red Robin Gourmet Burgers Inc. (RRGB) and Luby’s, Inc. (LUB). By restaurant concepts, comps fell 3.2% at Chili’s Grill & Bar, 4.7% at On The Border and 1.6% at Maggiano’s.
Brinker expects to generate free cash flow in the range of $190 million to $200 million during fiscal year 2010. During the quarter under review, the company repaid $140 million of term loan, reducing the balance to $250 million.
During the quarter, one company-owned and 36 franchise restaurants were opened (or acquired), and 23 company-owned and one franchise restaurants were closed (or sold). During fiscal year 2010, Brinker expects to open 2 company-owned restaurants and 42 to 52 franchise restaurants.
At the end of second-quarter 2010, Brinker either owned, operated, or franchised 1,712 restaurants under Chili’s Grill & Bar (1,504 restaurants), On The Border (163 restaurants) and Maggiano’s (45 restaurants).
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