Brinker International reevaluates after tough quarter

by Eric Schroeder
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 Chilis
Brinker plans to focus on convenience, menu innovation and value at it Chili's restaurants.
 

DALLAS — Coming off a quarter in which earnings fell 27 percent and sales slipped 2.3 percent, “everything is up for grabs” at Brinker International, Inc., Wyman Roberts, president and CEO, told analysts during a Jan. 25 conference call.

Wyman
Wyman Roberts, president and CEO of Brinker

“We are always evaluating where to invest for the best return and for the long-term viability of the business and the brand,” Roberts said. “So whether it’s a capital investment or not, or whether it goes back into kind of an expense category on the menu, we are constantly kind of making those decisions relative to how they impact the long-term viability of the business and the brand.”

Net income in the second quarter ended Dec. 28, 2016, totaled $34,637,000, equal to 70 cents per share on the common stock, down from $47,694,000, or 81 cents per share, in the same period a year ago. Total revenues fell to $771,043,000 from $788,610,000.

For the six months ended Dec. 28, net income was $57,870,000, or $1.11 per share, down 29 percent from $80,901,000, or $1.35 per share, in the same period a year ago. Total revenues were down 1.4 percent to $1,529,535,000 from $1,551,169,000.

 Chilis
Brinker's total revenues fell $175,670,000.
 

During the call, Roberts said Brinker’s second-quarter results “are not where we want them to be,” adding that the company is working to build share in the short term and to ensure the long-term health of its brands.

“The second quarter was really a mixed bag for us,” he said. “We started off fairly strong, and when we talked to you back in October, we were feeling pretty good. Then the brand experienced a situation at one of our Chili’s restaurants on Veterans Day that played out extensively on social media, followed by a couple of very tough weeks where we saw our business gap to the category drop to a level we hadn’t seen in quite a while. We dealt with that situation by taking the necessary corrective actions as quickly as we could, and we closed that gap after about three weeks.

“Unfortunately, in December, the whole category really started to get soft. We believe that’s largely driven by the shift in holiday retail traffic to on-line, which is starting to impact how holiday shopping patterns play out. And based on this year’s activity, some of the assumptions we have made that we’ve used regarding how to market during this time of year will have to be reevaluated.”

 Chilis
Brinker is optimistic about Chili's "3 for Me" platform.
 

To increase the company’s relevance and to address headwinds in casual dining, Roberts said Brinker needs to get more focused at Chili’s. To accomplish that, the company has committed to leveraging the foundation it has built and pledged to take bolder actions.

“Specifically, we are focused on convenience, menu innovation and value,” he said. “We know consumers are seeking increased convenience, and we believe technology plays a big part in being smarter and faster and delivering a better guest experience on their terms in a way that works for our business.”

One area of the business that Brinker feels good about at Chili’s is the restaurant chain’s “3 for Me” platform. As the name suggests, for $10, customers get a three-course meal at participating locations. Customers may choose either a house salad or tostada chips and salsa to start. The main course is either chicken or carnitas fajitas, and for dessert, customers get a mini Molten Cake.

Chilis
Chili's recently launched smokehouse platters.
 

“We feel great about how our ‘3 for Me’ platform is working for us and the flexibility it offers us to continually keep it fresh, relevant and profitable,” Roberts said. “Today, nearly a third of our guests dine on a value platform and we continue to test multiple options to maximize the offering and drive traffic across our dayparts.

Menu innovation also will play a role in revenue recovery at Chili’s. The restaurant chain has introduced new food to its bar menu as well as added smokehouse platters, which include jalapeño cheese sausage, bone-in chicken and Chili’s signature baby back ribs.

“These are terrific products that have been well received with preference levels above expectation,” he said. “Clearly, this represents the kind of innovation we believe is worth the operational effort.” 

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