Spicy earnings, outlook lift shares in Chili's Grill owner to new high

Fri Aug 2, 2013 1:15pm EDT

(Reuters) - Chili's Grill & Bar parent Brinker International Inc (EAT.N) reported a better-than-expected quarterly profit and forecast higher earnings for fiscal 2014, sending its shares up as much as 8 percent to an all-time high.

Brinker's fourth-quarter sales missed expectations as frugal diners continued to shun full-service restaurants but the company kept costs of sales and labor under control.

Brinker, like Applebee's and IHOP owner DineEquity Inc (DIN.N), has been struggling to pull in price-conscious customers in a sluggish economy.

"The restaurant industry isn't recovering as fast as we had hoped," Chief Executive Wyman Roberts said on a conference call with analysts.

"Brinker in particular was impacted by increased pressure and deep discounting by our closest competitors during the fourth quarter," Roberts added.

DineEquity reported a better-than-expected profit on Wednesday, helped by value-priced menus and more focused advertising.

Brinker said it would stay away from limited-time offers to attract customers and would instead focus on long-term profitability.

Brinker will be able to meet the high end of its full-year profit forecast if restaurant trends improve and if the company continues to introduce new menu items, said analyst Stephen Anderson of Miller Tabak & Co.

"Within the mid-scale bar and grill category, in which Chili's competes, I see them as the value leader," Anderson said.

Brinker said it expects adjusted profit of $2.70 to $2.85 per share for the year ending June 2014. Analysts were expecting $2.75 per share, according to Thomson Reuters I/B/E/S.

Comparable restaurant sales at the company's mainstay restaurant Chili's, fell 0.6 percent in the fourth quarter. Overall same-restaurant sales fell 0.5 percent.

The company's restaurant operating margins, however, rose to 18.1 percent from 17.5 percent a year earlier.

Brinker said cost of sales at Chili's fell as a percentage of sales in the fourth quarter due to new menu items such as flatbreads and pizzas.

New kitchen equipment helped reduce labor costs at the chain which accounts for a majority of Brinker's sales.

The Dallas-based company, which also owns the Maggiano's Little Italy chain, said net income fell to $46.4 million, or 64 cents per share, in the fourth quarter ended June 26, from $47 million, or 61 cents per share, a year earlier.

Excluding items, the company earned 77 cents per share, above analysts estimates of 74 cents.

Revenue, including franchise sales, rose marginally to $730 million but fell short of analyst estimate of $736.4 million.

Brinker's shares were trading at $43.61 in afternoon trading on the New York Stock Exchange.

(Editing by Don Sebastian)

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