Brinker Intl (EAT 51.40, -0.39, -0.75%) has been making a strong move in recent months as its turnaround efforts appear to be paying some dividends. Brinker is one of the world's leading casual dining restaurant companies. Brinker operates 1,682 restaurants under the names Chili's Grill & Bar (1,630 restaurants) and Maggiano's Little Italy (52 restaurants).
- Chili's: Its menu has featured bold, American favorites, and in recent years Chili's has expanded its menu to include more Fresh Mex and Fresh Tex offerings.
- Maggiano's: This is a full-service, national, casual dining Italian restaurant brand. The exterior of each Maggiano's restaurant varies to reflect local architecture; however, the interior of all locations transports guests back to a classic Italian-American restaurant in the style of New York's Little Italy in the 1940s. Maggiano's restaurants feature individual and family-style menus, and most of restaurants also have extensive banquet facilities designed to host large party business or social events.
Casual dining traffic has slowed in recent years which has led to
sluggish sales for EAT and other restaurant chains. As a result, EAT has been
taking steps to turn around its Chili's segment. Steps include cutting its menu
by 40% and working to improve the quality and value of its core menu items such
as burgers, ribs, and fajitas. A more focused menu should allow Chili's to
differentiate its food from other restaurants.
Chili's has also been training servers to improve the consistency and speed of the guest experience. Tickets taking longer than 15 minutes, which is the main source of guest complaints, have dropped by 40%.
In Q1 (Sep) the strategy was put in place, in Q2 (Dec) it was about implemented, and in Q3 (Mar) EAT started to see momentum with significant changes in traffic. On May 1, EAT reported MarQ results, which marked the second quarter into its turnaround strategy. EAT said that it's clear the investments made to increase quality, consistency, and value are paying off.
EAT is seeing sales and traffic improvements and the company believes this momentum is sustainable due to foundational work it has done to strengthen Chili's overall value perception. EAT has improved its menu, its atmosphere and it's providing a faster, more consistent and convenient experience. All of this is having a positive impact on the value perception of Chili's. And a strong value perception is critical in this very competitive environment.
The stock has run nearly 50% from late March when it was trading around $35 to around $52 now and it has made a very strong move in June. Our sense is that investors are getting excited about that upcoming Q4 (Jun) report, which should be released around August 9-10. EAT showed good momentum in MarQ and JunQ is expected to be good as well. It probably will not be a huge blowout in terms of comps/results, but if EAT can keep showing steady progress, investors will probably be happy with that. On a final note, EAT pays a nice dividend with a current yield of 2.9%.