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Brinker Intl (EAT -10%) is trading sharply lower after wrapping up FY24 on a down note. This restaurant operator (Chili's, Maggiano's) posted a rare EPS miss, following seven consecutive EPS beats. Revenue rose a healthy 12.3% yr/yr to $1.21 bln, which was better than expected. Guidance was a problem area. Adjusted EPS for FY25 is expected at just $4.35-4.75, which was below analyst expectations. However, FY25 revenue guidance was better than expected.

• Comps were quite good at +13.5% (Chili's +14.8%; Maggiano's +2.5%). The comp increase at Chili's was primarily due to increased menu pricing and higher traffic. EAT also said that the launch of the "Big Smasher" burger and the strength of Chili's advertising highlighting value drove traffic during JunQ. Additionally, the Chili's traffic increase of 5.9% includes a negative impact of approximately 2.3% from EAT's decision to de-emphasize virtual brands.
• EAT says comps benefitted because the launch of its Big Smasher and its Triple Dipper went viral on TikTok. As a result, Chili's experienced a step change in its business. A majority of the incremental guests were new to Chili's, so EAT responded quickly by adding labor to ensure it could handle the increased volume.
• In terms of why EAT missed on EPS, the company did not specifically give a reason. However, it did say that with the traffic spike at Chili's during JunQ, the company chose to accelerate investments in key areas such as repair and maintenance to ensure its buildings were welcoming and well-maintained. EAT also increased hiring to staff up and be able to take care of the guests.
• Looking ahead, while the industry has softened in July due to rocky macros, EAT says its quarter-to-date sales trends have remained strong, but at a more sustainable level. July sales for Chili's were in the high single digits, including positive traffic. In terms of the downside FY25 EPS guidance, EAT said that, even though it's not experiencing the same softness as others, it did contemplate the macros in its guidance.

Overall, this was a rough way to end FY24. Sales and comps were great, partly fueled by going viral on TikTok. However, higher MRO and labor hires seem to have clipped EPS results. Probably more worrisome was the EPS guidance for FY25, which was a good bit light. The silver lining is that it sounds like EAT is just being cautious given the macro environment, rather than seeing anything in their data. However, this is a reminder that consumers are dining out less.