Chili's parent Brinker beats estimates and raises forecast as Maggiano's keeps sliding

Brinker International, the Dallas-based owner of Chili's Grill & Bar and Maggiano's Little Italy, reported first-quarter profit and revenue Wednesday that beat Wall Street's estimates and raised its full-year forecast, as Chili's extended its streak of same-store sales growth to 22 consecutive quarters even as the smaller, upscale Maggiano's chain kept losing diners.

Net income for the quarter ended September 23 rose to $113.3 million, or $2.64 a diluted share, from $99.5 million, or $2.17 a share, a year earlier, according to a results filing the company made with the Securities and Exchange Commission. Excluding one-time items such as a loss on early debt repayment, adjusted earnings were $2.77 a share, about 13 percent above the $2.45 average analyst estimate compiled by the research service StockStory. Total revenue rose 9.4 percent to $1.48 billion, also ahead of Wall Street's roughly $1.46 billion forecast.

• Adjusted earnings per share: $2.77, versus $2.45 expected
• Revenue: $1.48 billion, up 9.4 percent from a year earlier
• Chili's comparable restaurant sales: up 10.1 percent
• Maggiano's comparable restaurant sales: down 3.4 percent

Operating income climbed to $151 million, or 10.2 percent of revenue, from $117.9 million, or 8.7 percent, a year earlier, and adjusted earnings before interest, taxes, depreciation and amortization rose to $209.1 million from $172.4 million. Free cash flow nearly doubled, to $105.7 million from $62.2 million, giving the company more room to buy back stock and pay down debt. Chili's generated $1.37 billion of the company's $1.46 billion in company-owned sales, with Maggiano's accounting for the rest; franchise fees added a further $14.4 million in revenue.

Much of the margin improvement came from labor. Restaurant labor costs fell to 31.4 percent of company sales from 32.3 percent a year earlier, as higher sales volumes let Brinker spread wages and staffing costs across more revenue per restaurant. Food and beverage costs ticked up slightly, to 25.9 percent of sales from 25.8 percent, while other restaurant operating expenses, including rent, utilities, marketing and delivery fees, fell to 25.0 percent of sales from 25.8 percent.

Chili's keeps outrunning its own numbers

Company-wide comparable restaurant sales rose 9.1 percent, driven almost entirely by Chili's, where sales at existing locations climbed 10.1 percent on a 6.4 percent increase in customer traffic and 3.7 percent higher menu prices. Chief Executive Kevin Hochman credited continued demand for the Big Crispy chicken sandwich, introduced broadly last spring, along with marketing and value positioning that he said have let the chain keep taking market share even as parts of the casual-dining industry have struggled to hold on to traffic.

"The Chili's flywheel of sustainable growth and market share gains keeps spinning, with industry leading value, world class marketing, and continued investments in operations that both attract new guests and keep regular guests coming back," Hochman said in the earnings release.

The 10.1 percent gain lapped a 21 percent increase in the same quarter last year and a 14 percent gain in 2024, giving Chili's a three-year cumulative comparable-sales increase of 52 percent, the company said. Even so, growth has decelerated from the unusually strong pace of a year ago: company-wide same-store sales rose 18.9 percent in the comparable quarter last year, versus 8.9 percent this time, according to StockStory's analysis of the results, a sign that the comparisons Chili's is now lapping are growing tougher. Chili's domestic sales, including franchised locations, rose 10.4 percent, while its franchised restaurants overall gained 7.4 percent, benefiting the independent operators who run those locations under license rather than Brinker directly. Those franchisees collected $14.2 million in royalty and fee revenue for Brinker during the quarter, up from $13.5 million a year earlier, a modest but direct read on how their own sales are faring.

Maggiano's keeps losing ground

The results were less favorable for Maggiano's Little Italy, Brinker's 51-restaurant upscale Italian chain, where comparable sales fell 3.4 percent as traffic dropped 5.1 percent, partly offset by a 2 percent increase in menu prices. Company sales at Maggiano's totaled $94.7 million, down from $99.2 million a year earlier; Brinker's filing attributed the decline "primarily to lower traffic, partially offset by menu pricing." The slide was not new: Maggiano's comparable sales also fell 2.5 percent in the fourth quarter of fiscal 2026, a report the company issued in August showed, and 6.4 percent in last year's first quarter, underscoring a prolonged soft patch for the brand even as its larger sibling thrives. Brinker ended the quarter with 1,641 restaurants system-wide, 1,590 of them Chili's and 51 Maggiano's, a count the company has kept essentially flat for two years while leaning on existing locations for growth.

Shares rise as guidance tops Wall Street

Brinker had told investors two weeks earlier that it would release results before the opening bell Wednesday, a day that also carried the Federal Reserve's own interest-rate announcement in the afternoon, a reminder that investors were weighing Brinker's results against a broader, uneven picture of how consumers and borrowing costs are moving. Brinker shares nonetheless rose in early trading, with gains reported as high as roughly 5 percent before narrowing later in the session, according to market data cited by financial news outlets.

Brinker raised its full-year adjusted earnings forecast to a range of $13.30 to $13.90 a share, up from the $12.60-to-$13.40 range it set three months earlier, and lifted its revenue guidance to $6.23 billion to $6.33 billion from $6.15 billion to $6.27 billion. The new outlook's $13.60 midpoint sits above the roughly $13.28 a share Wall Street had been modeling for the year, giving investors a reason to look past Maggiano's weakness. The guidance still includes an extra, 53rd operating week in the fiscal fourth quarter, which Brinker estimates will add about 2 percentage points to revenue and 70 cents to per-share earnings for the full year.

Buybacks, debt and what comes next

Brinker used operating cash flow to repurchase $125 million of its own stock during the quarter. In July, it also redeemed the remaining $350 million of 8.25 percent notes it had outstanding, financing the payoff through its revolving credit facility; the refinancing produced a $17.6 million loss on debt extinguishment, recorded within interest expense. Brinker drew $470 million on its revolving credit facility during the quarter and repaid $95 million of it.

Brinker's next test, covered by its fiscal second-quarter report expected in early 2027, will be whether Chili's can keep growing against comparisons that only get harder and whether Maggiano's can stop its traffic declines. The company said it still expects capital expenditures of $265 million to $285 million for the year and roughly 42 million to 43 million diluted shares outstanding, with margin expansion continuing even as it works through a menu and marketing push that has outperformed much of the casual-dining sector it competes against, including rivals also trying to win back price-sensitive diners.

For now, the diverging paths of Brinker's two chains leave the company in an unusual position: a casual-dining operator whose flagship brand is still compounding double-digit sales growth after more than five years of uninterrupted gains, while its smaller, pricier concept contends with the same soft traffic that has weighed on much of the sit-down dining industry. How long that split persists is likely to influence how much of Brinker's cash flow continues to flow toward buybacks and debt reduction rather than new investment in either brand.