Q1 2027 Brinker International Earnings Conference Call - BRINKER INTERNATIONAL INC

Explicit Guidance:

• FY2027 Revenue: Revised upward to $6.23 billion – $6.33 billion.
• FY2027 EPS: Revised upward to $13.30 – $13.90 (adjusted diluted).
• FY2027 Share Count: Weighted average shares expected at 42 million – 43 million.
• FY2027 Capex: Forecasted at $265 million – $285 million.
• FY2027 Comps: Expectation of another year of same-store sales growth; Q2 starting with high mid-single-digit comps, with back-half (Q3-Q4) returning to mid-single-digit same-store sales growth.
• FY2027 Margins: Full-year restaurant operating margin improvement expected at 70–90 basis points, driven by sales leverage (including a ~30 bps positive impact from a 53rd week in Q4); Q2 margins expected roughly flat YoY due to labor investment, with Q3 returning to 20–40 bps improvement.
• FY2027 G&A: Expected to hover around 4.0% – 4.1% of sales.
• FY2027 Labor Inflation: Anticipated at approximately 3% for the full year.
• FY2027 Commodity Impact: Approximately $7 million of freight/oil cost pressures built into guidance, primarily impacting restaurant expense rather than food/beverage costs.

Business-Segment Outlook:

• Chili's Traffic & Mix: Projecting traffic continues to outpace industry with positive growth in back half; mix expected to remain flat for full year despite some recent consumer check management (lower alcohol/dessert attach) in October.
• Big Crispy Chicken Sandwich: Driving incremental traffic with ~2 sales/day per store in launch week; execution focus on "scratch-made batter" and hand-breading; merchandising (table tents) rolling out November 1st to improve order ease; Q4 launch of "Big Crispy Parm" variant via PR/digital; future innovation (e.g., new chicken/hamburger variants) dependent on traffic trends rather than fixed cadence.
• Menu Updates: Ongoing upgrade of 40% of remaining menu over next few years; recent additions include Blue Bell ice cream, sausage in pasta, return of cheesecake, and expanded Kids menu; Q4 test of moving desserts to the top of the KDS screen to boost attach rates without slowing table turnover.
• Maggiano's: Banquet sales up 11% YoY; cross-functional team successfully reinstated banquet sales managers and streamlined execution; full KDS (Kitchen Display System) technology rollout from Chili's expected to be live in all units by next year to improve ticket times and food temperature consistency.
• New Unit Growth: Fiscal 2027 growth modest; ramp-up anticipated in Fiscal 2028 with goal of 2–3% annual unit growth by Fiscal 2029; 300+ potential trade areas identified including Pacific Northwest, Texas, Florida, Carolinas, and small-town markets.
• Reimage Program: 20 completed, 13 under construction, 60–80 expected in FY2027; FY2028 target of 10% fleet annually; remodel cost per unit $500,000–$600,000 with expected sales lift of 3%–5%.

Market and Competitive Outlook:

• Market Share: Belief in continued market share capture as consumers under macro pressure select trusted value leaders; Chili's traffic has beaten industry for 12 consecutive quarters.
• Value Proposition: Strategy focused on "everyday value leadership" ($10.99 Big Crispy meal) to drive traffic despite consumer check management; differential with competitors expected to narrow slightly based on new Black Box Intelligence data, but confidence remains in value positioning.
• Social Media Trends: Casual dining brands adopting QSR-style social media virality; success depends on operational execution to match online expectations (e.g., food quality consistency) to drive repeat visits.
• Off-Premise: Delivery and Carryout each represent ~12.5% of business; multi-year initiative underway to improve ease of ordering (reorder button optimization), promised time calculators, and packaging/accuracy; goal to grow faster than dine-in once operational fixes are realized.

Macro / Industry Outlook:

• Consumer Sentiment: Consumer under pressure from gas prices and interest rates leading to reduced frequency but increased loyalty to value brands; traffic acceleration expected to offset mix/slippage.
• Inflation: Labor inflation (~3%) and commodity inflation (~3.3% in Q1) expected to be managed through sales leverage and pricing power; specific freight/oil pressures ($7M) already factored into guidance.
• Regulatory/Data: Acknowledgment of prior industry benchmark errors by Black Box Intelligence regarding casual dining per-person averages; new data to be incorporated in November update.

Strategic Initiatives:

• Throughput Optimization: Rolling out "North of Six" best practices on labor scheduling and host stand management (roles: meter, seeder, greeter); goal of zero "false waits" (incorrect wait times); new handheld order-taking interface rolling out by end of calendar year to reduce order taps.
• Operational Simplification: Removal of "GWAP" (Guest Waiting Average Performance) from GM bonus structure to refocus on behaviors; implementation of simplified daily reporting metrics to reduce distraction.
• Off-Premise Tech: Development of an AI-fueled "Heart of House" ERP-like system for forecasting, inventory, and labor scheduling (2–3 year timeline); interim solution for promised time calculators currently in restaurants.
• KDS Migration: Deploying Chili's advanced back-of-house KDS to Maggiano's to improve food quality consistency and speed.

Risks and Headwinds to Outlook:

• Comparables: Expectation of tougher year-over-year same-store sales comparisons in H2 FY2027, particularly Q3 (lapping high prior year comps) and Q4 (Nov 2023 vs. Nov 2024 comparison).
• Consumer Pressure: Potential for continued check management on alcohol and desserts if macro pressures persist, though traffic gains are currently viewed as the dominant driver.
• Execution Risks: Success of new unit growth and reimage programs dependent on maintaining quality and managing construction costs; off-premise improvements viewed as a multi-year effort with no immediate "magic wand" fix.
• Labor Dynamics: Continued need for investment in labor to support throughput and guest experience, potentially pressuring Q2 margins YoY.

Management Tone on the Future:

• Confidence: High confidence in the sustainability of the "traffic-led strategy" and the "flywheel" of sales, margin, and reinvestment; belief that the strategy can deliver double-digit comps even after big prior bases.
• Strategy: "Playing offense" to maintain momentum; focus on "fewer, bigger" operational and marketing swings; belief that competitors' reliance on short-term offers is less effective than fundamental operational excellence.
• Guidance Adjustments: Confident in updating targets upward due to Q1 outperformance and strong Q2 start; no expectation of major deviations barring significant macro shifts.

Miscellaneous:

• Share Repurchases: Continued support of capital allocation strategy with $125 million of common stock repurchased in the quarter.
• Dividends/Returns: Commitment to return significant capital to shareholders via buybacks while maintaining low debt levels and funding growth.