Chili's parent sees margins rising

LOS ANGELES (Reuters) - Brinker International Inc (EAT.N), owner of the Chili's restaurant chain, forecast higher operating margins in the new fiscal year as it benefits from a simpler menu that requires less labor, sending its shares up nearly 5 percent.

The company, which is working to make its restaurants more efficient while introducing a new dinner promotion, said it expects profit of $1.30 to $1.42 per share for the fiscal year that began July 1. The average Wall Street forecast is $1.38.

The company's forecast assumes an improvement of 0.7 to 1.0 percentage point in operating margin, with sales at restaurants open at least 18 months flat to down 2 percent.

"Guidance looks realistic," JPMorgan analyst John Ivankoe said in a note to clients. Ivankoe was looking for 2011 operating margins to improve 0.1 percentage point.

Shares of Brinker rose 4.7 percent to $15.59 in midday New York Stock Exchange trading.

A tepid U.S. economic recovery and high unemployment are keeping spending on meals away from home in check at all but the hottest restaurant chains.

"Consumer sentiment still remains tough and people are still looking for a deal," Chili's President Wyman Roberts said on a conference call.

Discounts are common in the crowded, fiercely competitive. bar and grill segment where Chili's operates. Rivals include Ruby Tuesday Inc (RT.N), DineEquity Inc's (DIN.N) Applebee's, and newer entrant Buffalo Wild Wings Inc (BWLD.O).

Chili's got back in the game after a short absence with its new "2 for $20" dinner promotion -- a shared appetizer and two entrees. The deal is a variation on its earlier "3 for $20" offer -- a shared appetizer, two entrees and a shared dessert. The latter promotion helped boost customer visits after initially denting profits.

Brinker said on Thursday that overall sales at restaurants open at least 18 months fell 3.4 percent during its fiscal fourth quarter, ended June 30.

Same-restaurant sales fell 4.1 percent at Chili's, which accounts for about 85 percent of Brinker's sales. The smaller Maggiano's Little Italy chain saw same-store sales rise 1.3 percent.

The results missed Wall Street targets. Analysts, on average, were looking for a 3.5 percent decline at Chili's and a 2.7 percent rise at Maggiano's, Bernstein analyst Sara Senatore said in a client note.

Fourth-quarter net income at Dallas-based Brinker rose to $63.6 million, or 62 cents per share, from $42.1 million, or 41 cents a share, a year earlier.

In June, Brinker sold its On the Border Mexican Grill business to a unit of private equity firm Golden Gate Capital.

Excluding discontinued operations, the company earned 44 cents a share in the fourth quarter, 2 cents below analysts' average forecast, according to Thomson Reuters I/B/E/S.

Quarterly sales rose slightly to $743.1 million, helped by an extra week in the fiscal year, but fell short of the $762.4 million analysts had expected.

Ruby Tuesday shares were down 0.5 percent in midday trading, while DineEquity rose 0.5 percent and Buffalo Wild Wings slipped 0.7 percent.

(Reporting by Lisa Baertlein and Ben Klayman, editing by Lisa Von Ahn and John Wallace)