On August 24th, Brinker International (EAT) reported on the fourth quarter and fiscal 2022 ending June 29th. Operating the Chili’s and Maggione’s brands Brinker International serves as a bellwether for casual dining competing in an inflationary environment with peer chains including Olive Garden, The Cheesecake factory and the Red Lobster, all faced with cost challenges from increased labor, food and utilities.

For the fourth quarter, net income was $40.2 million on revenue including franchise fees amounting to $1,021 million of $859.6 million with a diluted EPS of $0.90.  Comparable values for the fourth quarter of the previous fiscal year ending June 30th were net income of $75 million on revenue of $1,009 million with a diluted EPS of $1.58.

For FY 2022, net income was $118 million on revenue including franchise fees amounting to $3,084 million with a diluted EPS of $2.58.  Comparable values for the previous fiscal year were net income of $132 million on revenue of $3,338 million with a diluted EPS of $1.58.

Brinker international posted assets of $2,484 million and long-term debt and lease obligations of $2,194 against a market capitalization of $1,300 million. EAT trades with a forward P/E of 7.8.

In commenting on results Kevin Hochman, CEO and president stated, “During my first sixty days I’ve spent considerable time in restaurants with our operators, exchanging ideas on how to make our operations more efficient, improve the guest experience, and grow the core business,” He added “We’re making quick interventions to better offset the tough inflationary headwinds and build sales momentum in the near term, as we work to meaningfully improve our four-wall economics and better position our business for long term sustainable and profitable growth.”

Brinker International reported a 3.1 percent increase in same restaurant sales for the fourth quarter of 2022 compared to 2021.  Chili’s gained 0.3 percent and Maggiano’s 30.1 percent. The company cited increased labor costs and inflation in food of $68 million as reasons for a decline in operating margin from 10.0 percent during the fourth quarter of 2021 compared to 4.4 percent for the most recently completed quarter. On a trailing 12-month basis, the company generated an operating margin of 6.5 percent and a profit margin of 3.9 percent with a 5.8 percent return on assets.

EAT closed on August 23rd pre-release at $30.44 and closed on August 24th at $28.61, down 6.0. Over a 52-week period, EAT has ranged from $21.47 to $55.53 with a 50-day moving average of $26.24. On July 29th 17 percent of the float was short.

Guidance for FY 2023 included revenue ranging from $3,900 million to $4,000 million; a diluted EPS of $2.45 to $2.85 and capital expenditure of $160 million.