Brinker Brinker now sees full-year adjusted EPS in

Brinker
International Inc. (EAT), -1.04% shares sank 4.6% in Wednesday premarket
trading after the restaurant company reported second-quarter earnings and sales
that missed consensus and cut its guidance. Brinker, whose brands include
Chili’s Bar & Grill and Maggiano’s Little Italy, reported net income of
$34.6 million, or 69 cents per share, down from $47.7 million, or 80 cents per
share, for the same period last year. Adjusted EPS was 71 cents, falling short
of the 74-cent FactSet forecast. Sales for the quarter totaled $748.7 million,
down from $765.7 million last year and missing the $786.0 million FactSet
consensus. Systemwide same-restaurant sales fell 3.1% for the quarter. Brinker
now sees full-year adjusted EPS in the range of $3.05 to $3.15, and revenue
down 2% to 2.5% from the $3.3 billion reported in 2016. The FactSet estimate is
for EPS of $3.55 and sales of $3.2 billion. Same-store sales are expected to be
down 1.5% to 2.0%, compared with a flat FactSet estimate. Brinker shares are
down nearly 4% for the past year while the S&P 500 index SPX, +0.11% is up
21.5% for the same period.

Investors
lost their appetite for Brinker International (NYSE:EAT) stock after the
operator of restaurant chains Chili’s and Maggiano’s Little Italy was
downgraded by JPMorgan Chase. Brinker shares closed 9.7% lower on the day.
The Wall Street titan cut its rating on Brinker
from “overweight” to “neutral,” saying that the
casual-dining chain operator had “exhausted its ability to engineer”
shareholder gains. The bank also said it was bearish on the overall restaurant
sector. Indeed, much of the restaurant industry, including casual dining, has
struggled lately as food deflation has made supermarket prices cheaper, rising
labor costs have cut into profits, and competition has increased. In its most
recent quarter, Brinker saw comparable sales at company-owned Chili’s
restaurants fall by 2.3%. Adjusted earnings per share, meanwhile, decreased
from $1.00 to $0.94.

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Shares
of Brinker International (NYSE: EAT) slipped last year as the Chili’s parent
got swept up by the restaurant recession. According to data from S&P Global
Market Intelligence Opens a New Window., the stock lost 22% over the year,
plagued by comparable sales declines and underwhelming earnings growth. The
stock fell consistently through the first three quarters of the year, trading
nearly 40% down at one point, but it recovered after a strong earnings report
in November and on broader optimism during the holiday season.

Brinker
got started off on the wrong foot in January with a weak second-quarter
earnings report, pushing the stock down 6.2%. Comparable sales at company-owned
Chili’s stores fell 3.3% as traffic dropped 6.5%. As a result, earnings per
share dropped to $0.71 from $0.78 the year before, in spite of aggressive share
buybacks. Management also lowered its outlook for the year, calling for
comparable restaurant sales to fall 1.5%-2% for the year.

The
restaurant industry is in the middle of a retrenchment, as casual-dining chains
such as Brinker have cut back on new store openings and retooled their menus
and experimented with add-ons such as delivery. Chili’s, for instance, has
introduced curbside pick-up. While comparable sales and earnings per share
continue to decline, there are signs that the restaurant recession is easing
and the slowdown in new store openings should help Brinker in 2018. With a
revamped menu and strong economic conditions, this year looks as if it should
be better for the Chili’s parent than last.