BRINKER INTERNATIONAL REPORTS SECOND QUARTER OF FISCAL 2023 RESULTS; AND UPDATES FISCAL 2023 GUIDANCE
DALLAS, Feb. 1, 2023 /PRNewswire/ -- Brinker International, Inc. today announced its financial results for the second quarter ended December 28, 2022. ... | February 1, 2023
DALLAS, Feb. 1, 2023 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced its financial results for the second quarter ended December 28, 2022.
Second Quarter Fiscal 2023 Financial Highlights
Our results for the second quarter of fiscal 2023 were driven by a solid increase in company sales and improved restaurant operating margin. Our brand's ability to implement incremental menu pricing and drive positive item mix led to a 9.7% increase in comparable restaurant sales for the second quarter of fiscal 2023. Specifically, Maggiano's experienced strong holiday sales in all channels, including dining room, banquet and to go, exceeding pre-pandemic levels. Restaurant operating margin improved over the first quarter of fiscal 2023 due primarily to the increase in sales and moderating commodity inflation. Commodity inflation for the quarter increased meaningfully year over year and will continue to be a headwind, although at a diminishing rate as we move through the rest of the fiscal year. We increased facility expenditures at our restaurants in the second quarter in alignment with our commitment to improving our guest experience and ensuring our restaurants are in good repair and well maintained.
"Our second quarter performance represents a positive step forward for our new approach," said Kevin Hochman, Chief Executive Officer and President of Brinker International. "Our focus on the Team Member and Guest experience, coupled with a more strategic pricing strategy, has allowed us to grow our top line and sequentially improve our margins. We will build on this solid foundation as we continue to implement our strategic initiatives and move the business forward."
Second Quarter Financial Results
Second Quarter
2023
2022
Variance
Company sales(1)
$ 1,009.4
$ 915.8
$ 93.6
Total revenues
$ 1,019.0
$ 925.8
$ 93.2
Operating income
$ 40.7
$ 39.8
$ 0.9
Operating income as a percentage of Total revenues
4.0 %
4.3 %
(0.3) %
Restaurant operating margin, non-GAAP(1)(2)
$ 117.0
$ 110.9
$ 6.1
Restaurant operating margin as a percentage of Company sales, non-GAAP(1)(2)
11.6 %
12.1 %
(0.5) %
Adjusted EBITDA, non-GAAP(2)
$ 91.0
$ 87.8
$ 3.2
Net income per diluted share
$ 0.62
$ 0.60
$ 0.02
Net income per diluted share, excluding special items, non-GAAP(2)
$ 0.76
$ 0.71
$ 0.05
Comparable Restaurant Sales(3)
Q2:23 vs 22
Brinker
9.7 %
Chili's
8.0 %
Maggiano's
21.2 %
•
Company sales(1) increased 10.2% to $1,009.4 million, driven by a comparable restaurant sales increase of 9.7%. The increase in comparable restaurant sales is due primarily to increased menu pricing, favorable menu item mix, plus the favorable impact of increased sales from fiscal 2022 acquisitions partially offset by lower traffic. Chili's and Maggiano's comparable restaurant sales increased 8.0% and 21.2%, respectively.
(1)
Certain reclassifications have been made to prior year revenue amounts to enhance comparability to the fiscal 2023 presentation. See Basis of Presentation section below for more details.
(2)
See Non-GAAP Information and Reconciliations section below for more details.
(3)
Comparable Restaurant Sales include restaurants that have been in operation for more than 18 months. Restaurants temporarily closed for 14 days or more are excluded from comparable restaurant sales. Percentage amounts are calculated based on the comparable periods year-over-year.
Updated Full Year Fiscal 2023 Guidance
We are providing the following updates to our full year fiscal 2023 guidance. The uncertainties created by current macroeconomic conditions, among other risks, could cause actual results to differ materially from those projected.
Total revenues are expected to be in the range of $4.05 billion - $4.15 billion;Net income per diluted share, excluding special items, is expected to be in the range of $2.60 - $2.90;Capital expenditures are expected to be in the range of $170 million - $180 million;Weighted average shares are expected to be in the range of 44 million - 45 million.We are unable to reliably forecast special items without unreasonable effort. As such, we do not present a reconciliation of forecasted non-GAAP measures to the corresponding GAAP measures.
Basis of Presentation
Effective for the first quarter of fiscal 2023, we are presenting certain revenue streams within Company sales to better align with the presentation used within the casual dining industry. Our presentation of Franchise revenues will now include only revenues related to the franchise-operated restaurants. Comparative figures in prior years have been adjusted to conform to the current year's presentation. These reclassifications have no effect on Total revenues or Net income previously reported.
Company sales include revenues generated by the operation of Company-owned restaurants, including food and beverage sales, net of discounts, Maggiano's banquet service charge income, gift card breakage, delivery income, digital entertainment revenues, merchandise income and gift card discount costs from third-party gift card sales.
Franchise revenues include franchise royalties, franchise advertising fees, franchise and development fees and gift card program fees.
Second Quarter of Fiscal 2023 Operating Performance
Segment Performance
The table below presents selected financial information (in millions, except as noted) related to our segments' operational performance for the thirteen week periods ended December 28, 2022 and December 29, 2021:
Chili's
Maggiano's
Second Quarter
Variance
Second Quarter
Variance
2023
2022
2023
2022
Company sales(1)
$ 869.3
$ 798.4
$ 70.9
$ 140.1
$ 117.4
$ 22.7
Franchise revenues(1)
9.4
9.8
(0.4)
0.2
0.2
—
Total revenues
$ 878.7
$ 808.2
$ 70.5
$ 140.3
$ 117.6
$ 22.7
Company restaurant expenses(2)
$ 780.1
$ 707.4
$ 72.7
$ 112.2
$ 97.3
$ 14.9
Company restaurant expenses as a % of Company sales(1)
89.7 %
88.6 %
1.1 %
80.1 %
82.9 %
(2.8) %
Operating income (loss)
$ 48.4
$ 56.0
$ (7.6)
$ 23.0
$ 15.0
$ 8.0
Operating income (loss) as a % of Total revenues
5.5 %
6.9 %
(1.4) %
16.4 %
12.8 %
3.6 %
Restaurant operating margin - non-GAAP(1)(3)
$ 89.2
$ 91.0
$ (1.8)
$ 27.9
$ 20.1
$ 7.8
Restaurant operating margin as a % of Company sales - non-GAAP(1)(3)
10.3 %
11.4 %
(1.1) %
19.9 %
17.1 %
2.8 %
(1)
Certain reclassifications have been made to prior year revenue amounts to enhance comparability to the fiscal 2023 presentation. See Basis of Presentation section above for more details.
(2)
Company restaurant expenses includes Food and beverage costs, Restaurant labor and Restaurant expenses, and excludes Depreciation and amortization, General and administrative and Other (gains) and charges.
(3)
See Non-GAAP Information and Reconciliations section below for more details.
Chili's
Chili's Company sales increased primarily due to increased menu pricing, favorable menu item mix and the acquisition of 68 restaurants in fiscal 2022, partially offset by lower traffic.Chili's Company restaurant expenses, as a percentage of Company sales, increased primarily due to commodity price inflation, higher repair and maintenance expenses, manager salaries and bonus, hourly wage rates, staffing levels, rent and utilities expenses, and delivery fees. These increases were partially offset by sales leverage.Chili's franchisees generated sales of approximately $213.4 million for the second quarter of fiscal 2023 compared to $201.8 million for the second quarter of fiscal 2022.Maggiano's
Maggiano's Company sales increased primarily due to higher dining room and banquet traffic and increased menu pricing.Maggiano's Company restaurant expenses, as a percentage of Company sales, decreased primarily due to sales leverage. The decreases were partially offset by commodity price inflation, higher hourly wage rates, delivery fees, and repair and maintenance costs.Income Taxes
On a GAAP basis, the effective income tax rate was a benefit of 3.0% in the second quarter of fiscal 2023. The effective income tax rate is lower than the statutory rate of 21% due primarily to leverage of the FICA tip credit and the impact of aligning fiscal 2023 year-to-date tax expense with the current estimated annual tax rate. Excluding the impact of special items, the effective income tax rate was an expense of 4.8% in the second quarter of fiscal 2023.Webcast Information
Investors and interested parties are invited to listen to today's conference call, as management will provide further details of the quarter and business updates. The call will be broadcast live on Brinker's website today, February 1, 2023, at 9 a.m. CDT:
URL
For those who are unable to listen to the live broadcast, a replay of the call will be available shortly thereafter and will remain on Brinker's website until at least the end of the day February 15, 2023.
Additional financial information, including statements of income which detail operations excluding special items, franchise revenues, and comparable restaurant sales trends by brand, is also available on Brinker's website under the Financial Information section of the Investor tab.
Forward Calendar
SEC Form 10-Q for the second quarter of fiscal 2023 filing on or before February 6, 2023Earnings release call for the third quarter of fiscal 2023 on May 3, 2023Non-GAAP Measures
Brinker management uses certain non-GAAP measures in analyzing operating performance and believes that the presentation of these measures in this release provides investors with information that is beneficial to gaining an understanding of the Company's financial results. Non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP measures are included in the tables below.
About Brinker
Brinker International, Inc. is one of the world's leading casual dining restaurant companies and home of Chili's® Grill & Bar, Maggiano's Little Italy® and two virtual brands: It's Just Wings® and Maggiano's Italian LINK. Founded in 1975 in Dallas, Texas, we've ventured far from home, but stayed true to our roots. Brinker owns, operates or franchises more than 1,600 restaurants in 29 countries and two U.S. territories. Our passion is making people feel special, and we hope you feel that passion each time you visit one of our restaurants or invite us into your home through takeout or delivery. Learn more about Brinker and its brands at brinker.com.
Forward-Looking Statements
The statements and tables contained in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are made only based on our current plans and expectations as of the date such statements are made, and we undertake no obligation to update forward-looking statements to reflect events or circumstances arising after the date such statements are made. Forward-looking statements are neither predictions nor guarantees of future events or performance and are subject to risks and uncertainties which could cause actual results to differ materially from our historical results or from those projected in forward-looking statements. Such risks and uncertainties include, among other things, the impact of general economic conditions, including inflation, on economic activity and on our operations; the impact of the COVID-19 pandemic; the crisis in Ukraine and related disruptions on our business including consumer demand, costs, product mix, our strategic initiatives, our partners' supply chains, operations, technology and assets, and our financial performance; the impact of competition; changes in consumer preferences; consumer perception of food safety; reduced consumer discretionary spending; unfavorable publicity; governmental regulations; the Company's ability to meet its business strategy plan; loss of key management personnel; failure to hire and retain high-quality restaurant management and team members; the impact of social media or other unfavorable publicity; reliance on technology and third party delivery providers; failure to protect the security of data of our guests and team members; product availability and supply chain disruptions; regional business and economic conditions; volatility in consumer, commodity, transportation, labor, currency and capital markets; litigation; franchisee success; technology failures; failure to protect our intellectual property; outsourcing; impairment of goodwill or assets; failure to maintain effective internal control over financial reporting; downgrades in credit ratings; changes in estimates regarding our assets; actions of activist shareholders; failure to comply with new environmental, social and governance (ESG) requirements; failure to achieve any goals, targets or