Brinker Intl (EAT, Financial) saw its stock drop by 10% after ending FY24 on a sour note. The restaurant operator, which owns Chili's and Maggiano's, posted a rare EPS miss after seven consecutive beats. Revenue rose 12.3% year-over-year to $1.21 billion, surpassing expectations. However, FY25 adjusted EPS guidance of $4.35-4.75 fell short of analyst predictions, despite better-than-expected revenue guidance.
- Comps were strong at +13.5% (Chili's +14.8%; Maggiano's +2.5%). The increase at Chili's was driven by higher menu prices and increased traffic. The launch of the "Big Smasher" burger and effective advertising boosted traffic during JunQ. Notably, the 5.9% traffic increase at Chili's included a 2.3% negative impact from de-emphasizing virtual brands.
- The viral success of the Big Smasher and Triple Dipper on TikTok led to a significant business boost for Chili's. Most of the new guests were first-time visitors, prompting EAT to quickly add labor to manage the increased volume.
- EAT did not specify why it missed on EPS but mentioned that the traffic spike at Chili's led to accelerated investments in repair and maintenance, as well as increased hiring to handle the guest influx.
- Looking ahead, despite industry softness in July due to macroeconomic factors, EAT reported strong quarter-to-date sales trends at a more sustainable level. July sales for Chili's were in the high single digits, including positive traffic. The cautious FY25 EPS guidance reflects macroeconomic considerations, even though EAT is not experiencing the same softness as others.
Overall, ending FY24 with lower EPS was disappointing despite strong sales and comps, partly driven by viral marketing on TikTok. Increased maintenance and labor costs impacted EPS results. The cautious FY25 EPS guidance is concerning, but it seems to be a precautionary measure rather than a reflection of current data. This situation underscores that consumers are dining out less frequently.
