Bank of America Maintains Underperform on Brinker Despite Margin Improvement

Bank of America has published a research report on Brinker International

after the company reported an aggressive 400 bps margin improvement. In the report, Bank of America writes, "EAT hosted a remodel/kitchen retrofit field trip EAT's aggressive 400 bps margin improvement target is largely premised on format changes implemented in Chili's kitchen and structural labor changes in the restaurants. Phase I of the program, which focused on team service and adjustments to kitchen preparation, is fully installed and the two programs account for 100 bps and 50-60 bps of margin improvement, respectively. Phase II, centered around kitchen retrofits with new equipment installation, is currently being executed and is expected to deliver 100 bps of margin savings once fully implemented a year from now. A new point of sale (

) system was installed to ease order taking and a back office system offering better monitoring of portion control are together expected to add 50-60 bps of margin benefits." Bank of America maintains its Underperform rating and $20 price objective on Brinker International, which closed yesterday at $23.56.