Brinker's same-restaurant sales lag peers

LOS ANGELES (Reuters) - Brinker International Inc (EAT.N) posted on Wednesday quarterly sales at established Chili's restaurants that lagged peers, sending the company's shares down almost 8 percent.

Brinker's overall same-restaurant sales results included a bigger-than-expected 5 percent drop at Chili's, which accounts for about 85 percent of total revenue, and a 1.4 percent increase at the smaller Maggiano's Little Italy chain.

President and Chief Executive Doug Brooks said on a conference call that, if sales gains remain elusive in the short term, Brinker would need to "transform" its business model.

While the overall full-service restaurant industry shows signs of modest recovery, Chili's has trailed its peers, including rivals in the beleaguered bar and grill segment such as Ruby Tuesday Inc (RT.N) and DineEquity Inc's (DIN.N) Applebee's.

Ruby Tuesday said on October 6 that sales at established company-owned restaurants were up 1.2 percent for the three-month period that ended August 31.

DineEquity has yet to report quarterly results, but has said that as of September 19, Applebee's domestic system-wide, same-restaurant sales were up 2.7 percent.

Some analysts say Chili's is losing customers to newer chains such as Chipotle Mexican Grill Inc (CMG.N) and Buffalo Wild Wings Inc (BWLD.O), which operate more modern-looking restaurants with food more in line with current tastes.

Chipotle reported last week a more than 11 percent surge in same-restaurant sales in its latest quarter.

Buffalo Wild Wings said on Tuesday that sales at established company-run restaurants were up 2.6 percent for the third-quarter, but down so far in the current quarter.

Also on Wednesday, P.F. Chang's China Bistro Inc (PFCB.O) reported higher third-quarter profit and said a rise in traffic helped boost sales at its established namesake restaurants 2.8 percent.

Brinker shares were down 7.8 percent at $18.55 in midday trading, while P.F. Chang's were down 4.5 percent at $47.38 after it trimmed its full-year outlook on lower margins and third-quarter same-restaurant sales were softer than some analysts expected.

KEY SALES TRAIL PEERS

Brinker's net income for the first quarter that ended September 29 rose 36 percent to $21.4 million, or 21 cents per share, topping analysts' average call for a profit of 15 cents per share, according to Thomson Reuters I/B/E/S.

Restaurant operating margin improved 190 basis points to 15 percent, helped by things such as lower costs for beef and chicken and a less labor-intensive menu.

Revenue fell 6 percent to $654.9 million, just short of the $659.5 million analysts had expected. Visits to Chili's fell 8.1 percent during the quarter.

Brinker, which is buying back shares, said overall same-restaurant sales at company-owned stores fell 4.2 percent from the year-earlier quarter, when Brinker's same-restaurant sales were boosted by a "3 for $20" promotion.

Chili's was not using that promotion in the second half of 2009, so same-restaurant sales comparisons should get easier in the second half of 2010, Guy Constant, Brinker's chief financial officer, said on a conference call.

Brinker did not comment on its 2011 forecast, saying it only provides updates if there are any material changes. It previously forecast a profit of $1.30 to $1.42 per share.

(Reporting by Lisa Baertlein in Los Angeles and Ben Klayman in Detroit; editing by Derek Caney, Dave Zimmerman and Andre Grenon)