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Brinker Intl (EAT -14%) is trading sharply lower despite reporting EPS upside with its Q3 (Mar) earnings report this morning. This restaurant operator (Chili's, Maggiano's) reported a huge 115% yr/yr jump in adjusted EPS to $2.66, which was solid upside, but not the blowout we saw in Q2 (Dec). Revenue rose a healthy 27.2% yr/yr to $1.43 bln, which also was much better than expected. EAT also increased FY25 EPS and revenue guidance.

• The metric that really jumped out at us was Q3 same-restaurant comps, which came in at a whopping +28.2% (Chili's +31.6%; Maggiano's +0.4%), which was even a bit better than Q2's +27.4% (Chili's +31.4%; Maggiano's +1.8%). EAT said that Chili's comps were driven primarily by continued increases in traffic, supported by advertising that highlights value and encourages guest trial. Operational improvements also contributed to driving repeat visits.
• Leveraging these higher sales, EAT saw improved margins. Restaurant operating margin (non-GAAP) rose to 18.9% from 14.2% a year ago. Regarding the menu, EAT is pretty excited about its recently launched Big QP, a burger pack with 85% more beef than a quarter pound burger. It joined the Big Smasher on the 3 for Me menu at the $10.99 price point.
• Following in its footsteps of turning around the Chili's brand, EAT is seeking to bring the magic back to Maggiano's by simplifying and elevating the menu, improving service levels, etc. It's also stopping unprofitable discounting that's not consistent with the Maggiano's brand. Discounting has been embedded in the business for years and EAT wants to change that.

Despite the good report, the stock is down sharply. We are not seeing anything as super negative although the EPS upside in Q3 was much narrower than Q1 and Q2. Perhaps investors were let down a bit by that. Regardless, while other chains have been struggling, its Chili's brand has been impressive in recent quarters.

Paring down the menu makes it simpler and makes employees more efficient. Also, we really think EAT has curated its value offering and has gotten it down to a science with its 3-for-Me offering. Consumers want value right now and Chili's is a great deal. Briefing.com has been profiling Brinker for some time and we have wondered why the stock had been a laggard. However, it has been making up for lost time.