MW Chili's owner's stock falls, as confidence in the growth outlook is questioned

By Steve Gelsi

Brinker International's stock drops more than 13% - even as the company beat profit expectations and raised it outlook - amid worries that the growth outlook is unsustainable

Chili's restaurant owner Brinker International's stock tumbled Tuesday as doubts swirled around whether it could maintain its brisk comparable-store sales growth.

Brinker's stock $(EAT)$ moved lower despite stronger-than-expected third-quarter earnings and revenue, as well as a boosted outlook from the restaurant chain.

The company also said it continues to face "traffic headwinds" in the turnaround for its smaller Maggiano's chain, as well as the prospect of higher prices from tariffs.

The fresh numbers included a 31.6% increase in Chili's same-store sales in its fiscal third quarter.

"People are really thinking a lot about same-store sales and sustainability of same-stores sales growth," Evercore ICI analyst David Palmer said on the company's quarterly earnings call. "People wonder ... did you have brand lightning in a bottle last year? That's tough to replicate."

The stock was down 13.4% in afternoon trading. That would be the biggest one-day drop in three years and the worst one-day post-earnings performance in at least five years, based on available FactSet data going back to April 2020.

The loss took a big bite out of the stock's year-to-date gains, but the shares were still up by 5% so far in 2025, while the S&P 500 index SPX has dropped 5.7%.

Last year, Brinker reported fourth-quarter same-sales growth of 14.8% for Chili's, followed by increases of 14.1% for its fiscal first quarter and 31.4% for its second quarter, which ended on Dec. 25.

Brinker Chief Executive Kevin Hochman said the company's trends heading into April "have been quite good" but that the company faces another "hurdle" in beating its past comparable-sales rise.

"It's going to be harder to look at that and go, I have 100% confidence this is going to happen," Hochman said. "What I will tell you is, what I focus on with our team is on food, service and atmosphere. Are we going to be significantly better this year versus last year? If the answer is yes, we have a lot of confidence we're going to continue to grow the comp."

The company said it managed to grow same-store sales at its Maggiano's restaurants by 0.4% due to higher prices, offset by an 8.2% drop in traffic during its third quarter.

"Like the early days in Chili's turnaround, we expect some traffic headwinds in the near term," the company said.

Raymond James analyst Brian Vaccaro reiterated a market-perform rating on Brinker and said the company turned in "very strong" third-quarter results. Chili's same-store sales growth of 31.6% topped his increased estimate, Vaccaro said.

For the third quarter, Brinker's net income more than doubled to $119.1 million, or $2.56 a share, from $48.7 million, or $1.08 a share, in the year-ago quarter.

Adjusted third-quarter earnings of $2.66 a share beat the FactSet consensus estimate of $2.56 a share.

Third-quarter revenue rose to $1.43 billion from $1.12 billion in the year-ago quarter, ahead of the analyst estimate of $1.39 billion.

The company lifted its full-year 2025 earnings estimate to a range of $8.50 to $8.75 a share, from its previous view of $7.50 to $8 a share. Analysts are currently expecting full-year earnings of $8.51 a share.

Brinker now expects 2025 revenue of $5.33 billion to $5.35 billion, up from its earlier guidance of $5.15 billion to $5.25 billion. The Wall Street analyst estimate is for full-year 2025 revenue of $5.25 billion.

The company noted that the tariff situation continues to be "fluid" but said it can take comfort in that over 80% of its supply chain is sourced domestically.

"We think that with our current pricing strategy that we can absorb any tariffs that come our way," the company said. "One of the most important things for us will be to continue to protect those opening price points and that industry-leading value for the guests that need it."

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 29, 2025 14:03 ET (18:03 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.