April 21, 2009 / 12:22 PM / 10 years ago

UPDATE 3-Brinker profits from big helping of cost cuts

* Brinker Q3 shr $0.45 a penny better than Street view

* Same-restaurant sales down 5.6 percent

* Shares fall 2.2 percent (Adds analyst comment, byline; previous dateline CHICAGO)

By Lisa Baertlein

LOS ANGELES, April 21 (Reuters) - Chili’s Grill & Bar parent Brinker International Inc (EAT.N) posted a profit on Tuesday, as cost controls offset a steeper quarter-over-quarter drop in sales at established restaurants.

Brinker, whose brands also include On the Border and Maggiano’s Little Italy, managed expenses by opening fewer outlets, rejigging staffing and reducing portion sizes as the casual-dining segment weathers a U.S. recession that has more consumers cooking at home and choosing less expensive restaurants.

The cost savings buffered the impact of swifter declines in sales at restaurants open at least 18 months. Same-store sales fell 5.6 percent across all brands during third quarter ended March 25, compared with the second quarter’s 4.5 percent decline.

Raymond James analyst Bryan Elliott said Brinker’s expense control efforts have lagged rivals, who cut costs earlier in the segment’s downturn.

“Other casual diners have been more aggressive at store cost controls since the industry sales slowdown began three years ago,” Elliott said in a client note.

Brinker’s third-quarter net income was $35 million, or 34 cents per share, compared with a year-earlier loss of $38.8 million, or 38 cents a share.

Net income at the restaurant operator, which recently sold a majority stake in its Macaroni Grill chain, included 11 cents per share in charges related to lease termination and severance costs.

Excluding charges, Dallas-based Brinker earned 45 cents per share. Analysts, on average, forecast 44 cents, according to Reuters Estimates, and the company said two weeks ago that earnings would be 44 cents to 45 cents.

Revenue fell 20.4 percent to $857.4 million, due in part to the closure of 47 restaurants and the sale of Macaroni Grills and other restaurants.

Brinker and other casual dining chains like P.F. Chang’s China Bistro PFCB.O, Cheesecake Factory Inc (CAKE.O), Ruby Tuesday Inc RT.N and DineEquity Inc’s Applebee’s (DIN.N) are offering variety of discounts and specials to lure diners.

Chili’s recently introduced 10 new portion-controlled menu items priced at $7 or less. On the Border has a $6.99 create-your-own menu, where guests pick from 15 items and Maggiano’s Little Italy is offering three wines by the glass for $5 each during April.

In addition to reworking its menu with an eye on profits, Brinker is cutting its own onions, rather than buying them pre-cut for “onion strings” and more precisely measuring portions of meat and other ingredients. It also changed Chili’s house tequila from Jose Cuervo Gold (DGE.L) to Juarez Silver and uses the new brand in a higher-margin $3.99 house Margarita.

Cost of sales as a percentage of revenue fell to 27.9 percent from 28.9 percent in the year-ago quarter.

Brinker shares were down 41 cents, or 2.24 percent, at $17.88 in midday trading on the New York Stock Exchange. (Reporting by Brad Dorfman and Jessica Wohl in Chicago and Lisa Baertlein in Los Angeles; Editing by Lisa Von Ahn, Brian Moss and Gunna Dickson)

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