BRINKER INTERNATIONAL, INC Q1 FY2027 earnings call

• Sustainable Growth Strategy: Management emphasized a 'flywheel' effect where marketing drives new guest acquisition (traffic), while operational excellence ensures repeat visits. Chili’s has beaten industry traffic growth for 12 consecutive quarters.
• Product & Menu Initiatives: The 'Big Crispy Chicken Sandwich' is a key traffic driver, sold at $10.99 to emphasize value against QSRs. Additional menu upgrades include Blue Bell ice cream, sausage on pasta, and returned desserts like cheesecake.
• Operational Efficiency: Focus remains on fundamentals, including scratch-made batter execution for the chicken sandwich and retraining staff on pasta perfection. The 'North of Six' staffing model was rolled out to handle increased traffic without sacrificing experience.
• Maggiano’s Turnaround: A cross-functional banquet team successfully restaffed and streamlined operations, leading to an 11% increase in banquet sales. This serves as a proof-of-concept for turning around the brand through focused resource deployment.
• Re-image Program: Chili’s completed 20 re-images with 13 under construction, targeting 60-80 completions in FY27. Each remodel costs $500k-$600k and yields approximately 3-5% sales lift.
• New Unit Growth: Targeting 2-3% annual unit growth by FY29, supported by Average Unit Volume (AUV) growth from $3 million to $5 million. Pipeline includes over 300 potential trade areas.

Chili's: Reported same-store sales growth of +10.1%, driven by a 6.4% increase in traffic and 3.7% from price, with mix flat. This marks the third consecutive year of double-digit comp growth. Maggiano's: Reported same-store sales decline of -3.4%, negatively impacted by a 5.1% drop in traffic, partially offset by 2% price increases. Banquet sales at Maggiano’s rose 11% year-over-year, though banquets represent only 15% of total brand revenue.

• Fiscal 2027 Revenue: Updated upward to $6.23 billion - $6.33 billion.
• Fiscal 2027 Adjusted Diluted EPS: Updated upward to $13.30 - $13.90.
• Fiscal 2027 Weighted Average Shares: Expected between 42 million and 43 million.
• Fiscal 2027 Capital Expenditures: Expected between $265 million and $285 million.
• Quarterly Outlook: Management anticipates Q1 will be the strongest YoY comp period, with subsequent quarters showing more moderate mid-single-digit growth due to tougher prior-year comparisons. Q2 started with high mid-single-digit comps.
• Margin Expectations: Full-year restaurant operating margin improvement expected at 70-90 basis points. G&A is expected to remain stable at 4.0%-4.1% of sales.

• Consumer Pressure: Macroeconomic factors, including gas prices and interest rates, are creating pressure on consumer check averages and mix, particularly regarding alcohol and dessert spending.
• Inflationary Costs: Unfavorable commodity costs (3.3% inflation) and higher hourly labor costs (approx. 2.6%) are impacting margins, though largely offset by sales leverage.
• Freight/Oil Inflation: Specific pressures from oil prices and freight costs are present, with approximately $7 million built into guidance primarily affecting restaurant expenses rather than food/beverage costs.
• Execution Risk: The success of new initiatives like the Big Crispy relies heavily on consistent operational execution; any slip in quality or speed could impact the brand's value proposition.

Q: David Palmer (Evercore ISI) asked about consumer behavior under macro pressure and the impact of oil/freight inflation on costs. / A: CEO Kevin Hochman noted that consumers are under pressure, leading to slight mix slippage but strong traffic growth as guests choose trusted brands for value. CFO Micah Ware confirmed that inflationary pressures, including ~$7 million from freight/oil, are fully built into the current guidance, with sales leverage continuing to protect margins.

Q: Dennis Geiger (UBS) requested specifics on back-half fiscal 27 same-store sales assumptions and current check management trends. / A: Management reaffirmed mid-single-digit same-store sales expectations for the back half, driven by positive traffic. Regarding value, the 'Three for Me' platform remains steady at ~21% of sales. While mix has recently softened slightly due to check management, traffic growth has more than compensated for this decline.

Q: Andrew Strelzik (BMO) inquired about the measurable benefits of throughput initiatives and changes in manager behavior following the bonus structure update. / A: CEO Hochman reported slight decreases in ticket time but no significant metrics yet, citing ongoing Host Stand and KDS rollouts. He highlighted that removing the GWAP metric from bonuses reduced distraction, allowing managers to focus on core operational behaviors and simplifying reporting structures.

Q: Sara Senatore (Bank of America) asked about the casual dining sector's appeal to younger demographics via social media and updates on Maggiano’s off-premise/delivery strategy. / A: Hochman explained that social media virality requires strong underlying operational execution to sustain long-term growth, distinguishing successful operators from those that merely go viral temporarily. For Maggiano’s, the next major initiative is deploying Chili’s advanced Kitchen Display System (KDS) to improve ticket times and service consistency.

Q: Brian Harbour (Morgan Stanley) sought details on the timeline for improving off-premise delivery/carryout and observations from the CEO’s recent restaurant work. / A: Management outlined a multi-year plan to improve off-premise ease, accuracy, and pickup experience, aiming to match QSR convenience while maintaining better value. The CEO noted that despite tech improvements, running complex table-service restaurants remains difficult, underscoring the critical need for manager retention and institutional knowledge.