Concerns Surface That Brinker Earnings Will Be Pressured By Promotional Pricing, Increased Expenses
While traditionally Brinker International, Inc. (NYSE: EAT) has achieved earnings growth on the back of above-peer-average growth in SSS, its comps in recent quarters have become weaker, Argus’s John Staszak said in a report. He maintained a Hold rating on the company, commenting that management now seems to be relying on share buybacks to drive EPS growth.
Brinker reported its F4Q16 revenue at $882 million, representing 15.4 percent y/y growth. The growth was achieved by the acquisition of 103 franchised Pepper Dining restaurants, which offset lower comps at Chili’s and Maggiano’s, analyst Staszak pointed out.
“Reflecting a 4.1% decline in restaurant traffic, offset in part by 1.3% more favorable product mix and 1.0% contribution from improved pricing, fourth-quarter same-store sales at company-owned Chili’s in the U.S. fell 1.8%,” Staszak noted.
Maggiano’s posted a 170bps decline in comps, with a 1 percent decline in restaurant traffic and a 2.5 percent negative contribution from product mix.
The company seems to be trying to drive EPS growth by share repurchases, delaying G&A spending and other cost cutting measures. “We are concerned that the company will need to boost G&A spending in the coming quarters, and that competitors’ promotions will require it to lower menu prices. We believe this could weigh on earnings going forward,” the analyst wrote.
Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email email@example.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!
Latest Ratings for EAT
|Jan 2017||Morgan Stanley||Downgrades||Equal-Weight||Underweight|
|Jan 2017||Telsey Advisory Group||Downgrades||Outperform||Market Perform|
|Dec 2016||BMO Capital||Downgrades||Market Perform||Underperform|
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.