BRINKER INTERNATIONAL, INC Q2 FY2025 earnings call

• Chili's delivered 31% same-store sales growth, outperforming the industry. They trimmed the menu, upgraded recipes (e.g., higher-quality chicken breast, fresh guacamole), installed new kitchen display systems, and are accelerating the conversion to TurboChefs. The Triple Dipper campaign drove 14% of total sales in Q2, up 3 points from Q1.
• Maggiano's is implementing a turnaround plan with simplification (eliminated menu items and prep steps), new leadership team members, and menu upgrades (e.g., Maggiano Caesar Salad with scratch-made dressing, upgraded meat sauce). They are working on improving speed of service and reimagining their estate.
• Marketing and menu innovation: Continued the better than fast food campaign, with a new 3 For Me innovation launching in Q4, and plans to upgrade fajitas in Q4 and ribs in Q1.

For the second quarter, Brinker reported total revenues of $1.358 billion. Chili's had same-store sales up 31.4%, with traffic at 19.9%, mix at 6.6%, and price at 4.9%. Maggiano's reported comp sales of positive 1.8%, driven by 6.4% price, 0.3% mix, and offset by -4.9% traffic. Chili's revenue contribution is a significant portion of Brinker's total, while Maggiano's is a smaller segment with its own performance metrics.

Brinker raised its fiscal 2025 full-year guidance: annual revenues in the range of $5.15 billion to $5.25 billion, adjusted diluted EPS in the range of $7.50 to $8, and capital expenditures in the range of $240 million to $260 million. Assumptions include planned commodity inflation in the low single digits, wage rate inflation in the mid-single digits, and a tax rate in the mid-double digits.

• Competitive pressures: Competitors could undercut prices, though Brinker believes it's difficult to replicate their total value proposition.
• Sustainability of marketing and operational improvements: Ensuring the momentum from social media campaigns and operational changes can be sustained long-term.
• Economic factors: Potential impact of economic conditions on consumer spending on casual dining.

Q: David Palmer asked about the sustainability of social media buzz, especially for Triple Dipper.

A: Kevin Hochman said it's hard to tease apart social media vs 3 For Me impact, but operational improvements have helped the virality last longer.

Q: Dennis Geiger asked about traffic success breakdown.

A: Kevin Hochman said frequency and new guests are up, but granular details are not shared yet.

Q: Chris O'Cull asked about Chili's longer-term margin potential.

A: Mika Ware said Q2 margins were outsized, expecting mid-teens to upper teens ROM for full year, and AUVs are growing.

Q: Jeff Farmer asked about free cash flow use.

A: Mika Ware said focus is on investing in the business, paying down debt, and returning cash to shareholders.

Q: Jeffrey Bernstein asked about TurboChef conversion.

A: Kevin Hochman said a quarter to a third of units need conversion, with significant benefits in speed, quality, and team member comfort.

Q: Brian Harbour asked about mix drivers.

A: Mika Ware said Triple Dipper and mozzarella sticks are the main mix drivers.

Q: John Ivankoe asked about Chili's asset base investment.

A: Kevin Hochman said reimaging will start next fiscal, with plans to roll out 100 reimages a year.

Q: Brian Vaccaro asked about guest experience metrics and labor.

A: Kevin Hochman said GWAP improved to 2.9% in Q2, and Mika Ware said labor ramped up to catch up with traffic.

Q: Christine Cho asked about digital journey investments.

A: Kevin Hochman said working on in-house data mining capability and improving loyalty program friction.

Q: Katherine Griffin asked about Maggiano's comp trends and social media conversion.

A: Mika Ware said Maggiano's has similar month-to-month trends, and Kevin Hochman said no specific conversion rate from social media impressions to sales.

Q: Andrew Strelzik asked about larger scale operational investments.

A: Mika Ware and Kevin Hochman said they evaluate investments based on operator feedback and focus on accelerating helpful ones.

Q: Jon Tower asked about advertising spend and daypart performance.

A: Kevin Hochman said marketing mix is working, and Mika Ware said all dayparts are growing.

Q: Jim Sanderson asked about Fajita launch marketing and operational fixes.

A: Kevin Hochman said details on Fajita marketing plan not available yet, focusing on merchandising, operational, and food fixes.