• Total Revenue: $1.358 billion for the second quarter.
• Same-Store Sales: Up 27.4% consolidated; Chili's up 31.4%, Maggiano's up 1.8%.
• Adjusted Diluted EPS: $2.80, up from $0.99 last year.
• Restaurant Operating Margin: 19.1%, a 600 basis point improvement year-over-year.
• Chili's Traffic: Positive 19.9%.
• Chili's Price Increase: 4.9%.
• Maggiano's Traffic: Negative 4.9%.
• Adjusted EBITDA: Approximately $216 million, a 102% increase from prior year.
• Capital Expenditures: Approximately $49 million for the quarter.
• Debt Repayment: Approximately $164 million repaid during the quarter.
• Lease Adjusted Leverage Ratio: 2.3 times.
• Fiscal 2025 Revenue Guidance: $5.15 billion to $5.25 billion.
• Fiscal 2025 Adjusted Diluted EPS Guidance: $7.50 to $8.
• Fiscal 2025 Capital Expenditures Guidance: $240 million to $260 million.

• Warning! GuruFocus has detected 6 Warning Signs with EAT.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brinker International Inc (NYSE:EAT) reported a significant increase in same-restaurant sales, with Chili's achieving a 31% rise compared to the previous year.
• The company has successfully implemented operational improvements, including menu simplification and ingredient upgrades, leading to enhanced guest satisfaction scores.
• Brinker International Inc (NYSE:EAT) has seen a positive impact from its marketing strategies, particularly through social media campaigns like the Triple Dipper, which have driven increased traffic and engagement.
• The company reported a substantial improvement in restaurant operating margin, achieving a 600 basis point increase year-over-year.
• Brinker International Inc (NYSE:EAT) has made strategic investments in technology, such as the installation of new kitchen display systems and TurboChef ovens, to improve operational efficiency and food quality.

Negative Points

• Despite the positive sales growth, Maggiano's reported a decline in traffic by 4.9%, indicating challenges in driving customer visits.
• The company faces ongoing competitive pressure, with rivals attempting to undercut its value propositions, which could impact future sales momentum.
• Brinker International Inc (NYSE:EAT) has experienced challenges in maintaining labor levels to match the increased sales volume, which initially affected guest experience scores.
• The company is still in the early stages of its turnaround strategy for Maggiano's, which may take several quarters to show significant traffic improvements.
• There is uncertainty regarding the sustainability of the current sales momentum, particularly the impact of social media-driven traffic, which may be difficult to replicate consistently.

Q & A Highlights

Q: Can you discuss the sustainability of the social media buzz, particularly with the Triple Dipper, and how you plan to maintain this momentum? A: Kevin Hochman, President and CEO, explained that while it's challenging to precisely measure the impact of social media versus other factors like the 3 For Me campaign, the operational improvements have helped sustain the buzz. The virality has lasted longer than typical due to the improved guest experience, making it part of the regular rotation for customers.

Q: How are value scores trending, and what are your thoughts on maintaining value perception amid competitive pricing? A: Kevin Hochman noted that value scores remain strong, emphasizing that it's not just about the lowest price but the overall experience, including consistent service and food quality. Despite competitors offering lower price points, the comprehensive value proposition at Chili's is difficult to replicate.

Q: With the introduction of new products in Q4, why is now the right time, and how will you manage the impact of multiple launches? A: Kevin Hochman stated that after a year of running the 3 For Me campaign, it's time to introduce fresh news to maintain momentum. The Fajita launch will focus on operational and menu improvements, while the 3 For Me innovation will be supported by advertising, ensuring both initiatives are effectively managed.

Q: What is the long-term margin potential for Chili's as AUVs increase? A: Michaela Ware, CFO, highlighted that while Q2 margins were exceptional, they expect moderation in the coming quarters. With AUVs growing from $2.9 million to over $4 million, there is still upside potential in margins as they continue to leverage sales growth.

Q: How do you plan to use free cash flow moving forward, and what are your priorities? A: Michaela Ware explained that the priorities remain investing in the business, paying down debt, and returning excess cash to shareholders. They will continue to evaluate share repurchases to offset dilution while focusing on growth and operational improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.