Appetite For Brinker Abated As Analyst Awaits Signs Of Subsiding Traffic Weakness

Will Slabaugh of Stephens believes Brinker International, Inc. (NYSE: EAT)'s stock isn't looking particularly attractive after the company reported its fiscal third-quarter report.

Brinker, the parent company of two restaurant concepts — Chili's Grill & Bar and Maggiano's Little Italy — posted $0.94 per share in the fiscal third quarter, which was good for a 9-cent per share beat. However, revenue of $810.6 million fell short of the $815.6 million analysts were expecting.

Slabaugh noted Chili's reported a same-store sales decline of 2.3 percent, better than the negative 3.0 percent he expected but worse than the 1.7 percent decline consensus estimates were looking for.

The analyst added that Chili's same-store sales metric was made up of 2.9 percent pricing, 1.0 percent mix but negative 6.2 percent traffic.

Similarly, Maggiano's reported a same-store sales decline of 1.6 percent, made up of 2.4 percent pricing, 1.4 percent mix but negative 5.4 percent traffic.

So Now What?

Slabaugh stated he will be looking for commentary from Brinker's management to address the traffic weakness seen in the quarter, especially at Chili's. Nevertheless, the analyst believes that the company could improve its traffic decline through a direct value message and/or improved menu quality message to consumers.

Until the company manages to show the analyst what he is looking for, he believes a sustainable recovery in traffic is unlikely.

Shares remain Equal-Weight rated with an unchanged $52 price target.

At last check, shares were down 3.83 percent at $43.74.

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