Brinker International Inc.

Overview Key strengths Key risks Scaled restaurant operator and franchisor of widely recognized Chili?s Grill&Bar Ongoing challenges related to the COVID-19 pandemic are disrupting customer traffic and staffing Good off-premise capabilities and growing contributions from virtual brands Operates in the highly competitive, discretionary casual dining restaurant industry Improving credit metrics achieved through EBITDA growth and debt paydown Elevated commodity inflation and labor challenges will pressure operating margins in fiscal 2022 Chili?s second-quarter fiscal 2022 comparable restaurant sales grew 12.1% year-over-year (5% vs pre-pandemic levels) led by an increase in customer traffic and higher average checks. Higher sales volumes and pricing actions enabled Brinker to slightly expand operating margins during the quarter despite higher commodity and labor costs, which

...We expect Brinker International Inc.'s consistent execution and value focus will support restaurant sales and modest earnings growth this year. Chili's second-quarter fiscal 2022 comparable restaurant sales grew 12.1% year-over-year (5% vs pre-pandemic levels) led by an increase in customer traffic and higher average checks. Higher sales volumes and pricing actions enabled Brinker to slightly expand operating margins during the quarter despite higher commodity and labor costs, which were up 190 basis points (bps) as a percent of sales year-over-year. The company has raised menu prices multiple times this fiscal year to manage higher operating expenses, with Chili's prices up over 4% and Maggiano's about 5% higher year-over-year. The magnitude of these increases, while higher than Brinker's roughly 1.5% increases pre-pandemic, are below the industry and we believe its relative value proposition will...

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