BRINKER INTERNATIONAL, INC Q1 FY2025 earnings call

• Chili’s: Strong Q1 sales growth driven by 3 for Me value offer and Triple Dipper, with guest metric guess at an all-time low of 2.7%. Menu simplification to core offerings, Big Smasher burger campaign successful, and barbell strategy on margaritas. Triple Dipper now 11% of business, with expansion to five to drive focus. • Maggiano’s: Progress on turnaround with simplification, labor productivity, and early signs of success, including reversed alcohol decline and new dish launches. • Oracle ERP transition: In progress with minimal impact on day-to-day operations.

Chili’s delivered 14% sales growth on a 6.5% traffic increase, with 14.1% positive comp sales. Brinker’s restaurant operating margin improved 310 basis points year-over-year to 13.5%. Maggiano’s reported 4.2% positive comp sales, driven by 10.8% price and 2.1% mix, but offset by negative 8.7% traffic. Chili’s core menu simplification led to core four offerings (burgers, crispers, fajitas, margaritas) representing 47% of business, with the Triple Dipper now 11% of sales. Maggiano’s saw alcohol trend reversal and labor productivity improvements.

• Raised full-year fiscal 2025 guidance: Annual revenues in range of $4.7B to $4.75B, adjusted diluted EPS in range of $5.20 to $5.50. • Restaurant level margin expected to be favorable 100 basis points or more year-over-year. • Advertising spend to increase, with incremental four weeks of TV advertising and dollars expected to spread with $3M to $4M in Q2 and Q3, closer to $7M in Q4.

Q: How are you thinking about the restaurant level margin for the year with strong same-store sales performance through Q1?

A: Mika Ware said they think they’ll continue to drive restaurant level margins and it will be a 100 basis points or more favorable year-over-year.

Q: Compare and contrast TV advertising weeks in 2024 and 2025?

A: Kevin Hochman said 2025 will be 31 weeks, Mika Ware added advertising dollars will be up $3M to $4M in Q2 and Q3, closer to $7M in Q4.

Q: How plan to use tokenized data to continue traffic and sales momentum?

A: Kevin Hochman said mining data to understand initiative performance in markets, like who comes from Big Smasher and Triple Dipper campaigns, and frequency of returns.

Q: Thoughts on menu pricing at Chili’s with 3 for Me platform?

A: Kevin Hochman said they need to manage merchandising to keep mix right, with 3 for Me mix up slightly and still selling higher tiers, and California as an early warning for mix issues.

Q: Investments through 2025 and margin items?

A: Mika Ware said marketing is a big change, with R&M expected to be up in Q1, slightly up in Q2, flat in Q3, and favorable in Q4.

Q: Social media support for traffic and sales growth?

A: Kevin Hochman said they have an exceptional social media team monitoring trends and working with agencies to create craveable content.

Q: Near-term sales and unit growth?

A: Mika Ware said sales accelerated through the quarter and continued into October, Kevin Hochman said no change to unit growth guidance but capital allocation discussions ongoing for new builds and reimaging.

Q: Learnings on new guests and frequency at Chili’s?

A: Kevin Hochman said tokenized data shows frequency compressed from 37 weeks to 31 weeks, with growth across demographics.

Q: Restaurant margin and upside opportunity?

A: Mika Ware said with revenue growth, margins can continue to improve, aiming for mid-teens margins and using pricing power to protect margins.

Q: Marketing spend evolution and sequencing of initiatives?

A: Kevin Hochman said continuing Big Smasher through Q3, then pivoting to new 3 for Me item in Q4, revisiting based on results.

Q: Fajitas relaunch and opportunities?

A: Kevin Hochman said fajitas relaunch in Q4, with menu merchandising and marketing, and more menu innovation planned.

Q: Restaurant team needs and labor model?

A: Kevin Hochman said continued simplification, Heart of House 2030 project, and Mika Ware said monitoring labor model and adding buzzer positions for service.

Q: 3 for Me lunch combo and mix driver?

A: Mika Ware and Kevin Hochman said it’s an evolution of the 3 for Me platform, simplifying menu, aligning with 3 for Me, and seeing mix help with trade-up options.

Q: Reimaging and unit growth?

A: Mika Ware said reimaging is future initiative, and unit growth is slow and steady with focus on existing markets and Maggiano’s white space.

Q: Maggiano’s pricing strategy and traffic?

A: Kevin Hochman said Maggiano’s in year one of turnaround, reducing discounting, losing traffic temporarily but expecting traffic improvement in year two.

Q: Household income demographics and marketing allocation?

A: Kevin Hochman said seeing different demographics, but marketing mix continues to work as Chili’s is for everyone.

Q: New unit development and sales performance?

A: Mika Ware said new restaurants don’t impact same-store sales, but closing underperformers helps margins and brand relevance.