Why Brinker International Looks Good

by | Oct 27, 2021

Brinker’s 1Q22 pre-release showed a period where costs ran faster than the ability to take menu prices. Because the overall industry is slowing down, Brinker is experiencing slowing growth.

The company did address the key topic – “What portion of the incremental costs are transitory vs structural?” by breaking out the detail within labor costs – 130bps of the 150bps increase y/y driven primarily by training.

Brinker International said wage inflation and management costs were offset by sales leverage during the quarter. R&M spend was higher versus previous levels, likely due to lapping lower store utilization and supply-chain related delays in kitchen equipment.

Menu prices have increased by 3.0-3.5%, and in addition, sudden costs and labor availability pressures seem to be leveling.

In 2019, Chili’s simplified its menu and as a result achieved a myriad of marketing and operational efficiencies. Brinker mostly achieved this with the Chili’s brand in 2019 and prior, but the company says it will start to see a net benefit.