Growth is still on the menu at Brinker International
Unfortunately, reality isn't as rosy as that 29% spurt in per-share profitability would seem to suggest. For starters, the company has been wolfing down shares outstanding through buybacks and a poorly executed Dutch auction. Income from continuing operations actually rose just 12% higher, divided by fewer shares outstanding to create meatier bottom-line growth. Share buybacks are a good thing, but investors can't fall for the inflated per-share figures as sustainable.
Brinker's real problem rests a few lines higher on the income statement. Revenues inched just 6% higher, despite robust expansion through new company-owned and franchised locations. In a troubling trend, all four of the company's chains posted lower comps for the quarter and for the month of December. Yes, even the smaller On the Border and Maggiano's Little Italy eateries failed Brinker, leading to a company-wide 2.1% slide in same-unit sales for the quarter.
Sure, it's great to see a company grow earnings at a faster clip than its revenues. What investors need to do, though, is keep watching those comps, because if Brinker's restaurants continue to fall out of favor, it will ultimately impact the bottom line.
This isn't a problem at other casual-dining chains. Cheesecake Factory
So go ahead and give Brinker a round of applause for its operating prowess. Now it's time to see what the company can cook up to get the hungry back into its restaurants. That's important, because you can't squeeze more out of an empty table.
For more on casual dining, check out:
Got a taste for Brinker or its competitors? Why not bring it to CAPS? There's always room for one more at our new stock-rating service.
Longtime Fool contributor Rick Munarriz loved when NBC's The Office hosted the Dunder-Mifflin awards inside a Chili's last year. He does own shares in Cheesecake Factory. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
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