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Brinker (EAT) Provides Q2 Business Update, Withdraws Guidance

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Zacks Equity Research
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Brinker International, Inc. EAT recently provided intra-quarter business updates for the second quarter of fiscal 2021. The company’s operations have been negatively impacted by the rise in COVID-19 cases. Following the news, the company’s shares declined 1.5% on Dec 16.

Nonetheless, Wyman Roberts, chief executive officer of Brinker International, stated, "As we work through this short-term change in the operational environment, we are confident in our continued ability to outperform the sector and the ability of our strategies to deliver long-term growth."

Comparable Restaurant Sales

Although the company saw a solid start to the fiscal second quarter, comps at Chili's Grill & Bar and Maggiano's Little Italy restaurants were negatively impacted by dining room closures and capacity limitations due to a rise in COVID-19 cases.

Notably, comps at Chili's for the week ended Oct 28, Nov 4, Nov 11, Nov 18, Nov 25, Dec 2 and Dec 9 declined 1%, 3.9%, 5.7%, 6.5%, 13.3%, 13.8% and 12.3% compared with the prior-year week, respectively. Despite the negative trend, it is worth mentioning that Chili's comparable restaurant sales have outpaced the casual dining industry during the fiscal second quarter.

Meanwhile, comps at Maggiano's for the week ended Oct 28, Nov 4, Nov 11, Nov 18, Nov 25, Dec 2 and Dec 9 decreased 34%, 44.1%, 42.4%, 44.5%, 39.4%, 53.8% and 63.9%, respectively. Moreover, comps at company-owned were down 4.9%, 8.9%, 10.3%, 11.4%, 16.4%, 21.1% and 21.7%, for the week ended Oct 28, Nov 4, Nov 11, Nov 18, Nov 25, Dec 2 and Dec 9, respectively.

As of Dec 9, 2020, the company announced that approximately 77% of Chili's and 69% of Maggiano's restaurants were operating with dining rooms open.

Other Updates

As of Dec 11, 2020, the company had cash of nearly $53 million and revolver availability of $593 million, resulting in available liquidity of $646 million.

Owing to the unprecedented nature of the crisis, the company has also withdrawn its second-quarter fiscal 2021 guidance.

So far this year, shares of the company have gained 31% compared with the industry’s 15.5% growth.

Zacks Rank & Other Stocks to Consider

Brinker sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other top-ranked stocks in the same space includes Ruth's Hospitality Group, Inc. RUTH, Jack in the Box Inc. JACK and Red Robin Gourmet Burgers, Inc. RRGB, each carrying a Zacks Rank #2 (Buy).

Ruth's Hospitality has a three-five year earnings per share growth rate of 15%.

Earnings for Jack in the Box and Red Robin in 2021 are expected to rise 20.2% and 87%, respectively.

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