Brinker (EAT) Q4 2025 earnings review
Chili's Turnaround Ignites Growth; Maggiano's Stumbles as Focus Shifts to FY26
Brinker International capped off a transformational year driven by the spectacular success of its Chili's brand, which posted +23.7% comparable sales in Q4 on a remarkable +16.3% traffic gain. This momentum, fueled by a sharp value proposition and viral marketing, drove a 55% increase in non-GAAP EPS for the quarter. However, the story is a tale of two concepts, as the smaller Maggiano's brand continues to struggle, with comparable sales turning negative and traffic falling nearly 9%. Looking ahead, FY26 guidance points to a more normalized growth trajectory, with implied revenue growth of ~5% and EPS growth of ~15%, suggesting the company must now prove it can sustain its gains while executing a new turnaround at Maggiano's.
🐂 Bull Case
Management argues the turnaround is built on durable operational improvements (menu simplification, better equipment) and a strong value proposition, not just fleeting marketing hype. Sustained traffic gains for seven straight quarters support this view.
Brinker paid down over $570 million in debt over the past three years, reducing its lease-adjusted leverage to a strong 1.7x. This provides significant financial flexibility to invest in remodels, new units, and shareholder returns.
🐻 Bear Case
With comparable sales turning negative (-0.4%) on a steep traffic decline (-8.9%), Maggiano's is a significant headwind. A leadership change and a new turnaround plan signal that a fix will take time and resources.
Chili's faces the monumental task of growing on top of a year with +25.3% comparable sales growth, including two quarters above +30%. The guidance for mid-single-digit revenue growth in FY26 reflects this challenge.
⚖️ Verdict: 🟢
Bullish. The scale and quality of the Chili's turnaround are undeniable, driven by high-quality traffic gains rather than just price. While Maggiano's is a clear concern and lapping tough comparisons will be challenging, the core profit engine is firing on all cylinders, the balance sheet is strong, and the strategy has been validated. The positive momentum outweighs the risks.
Key Themes
Maggiano's Turnaround Just Beginning
Maggiano's performance sharply contrasts with Chili's success. Q4 comparable sales fell 0.4%, driven by an 8.9% collapse in traffic. Restaurant operating margin compressed by 270 basis points to 13.3%. In response, a leadership change was announced, with the CEO taking interim president duties and a top Chili's operator appointed as COO. The plan is to apply the 'Chili's Playbook,' which management warns will cause near-term 'traffic choppiness' as they remove discounts to fund investments.
Chili's 'Invest to Grow' Strategy is a Home Run
Chili's success stems from a multi-faceted strategy focused on fundamentals. This includes an aggressive value proposition ('3 For Me' platform), culturally relevant marketing that drove viral social media moments (Triple Dipper, now 15% of sales), and deep operational simplification. The company has eliminated over 25% of its menu in three years, invested over $160 million more in labor annually, and upgraded kitchen equipment, resulting in guest problem rates falling to a record low of 2.3%.
Facing a Wall of Tough Comparisons
The success of FY25 creates a significant challenge for FY26. Chili's will have to lap quarters with comparable sales growth of +31.4% and +31.6%. Management expressed confidence in their ability to post positive comps each quarter in FY26, but the guidance for ~5% total company revenue growth implies a sharp slowdown from the +22% growth achieved in FY25.
Capital Strategy Shifts to Offense: Remodels and New Growth
Having successfully repaired the balance sheet by paying down over $350 million in debt in FY25 alone, Brinker is shifting its capital focus to growth. The company will begin rolling out its first four 'Modern Greenville' remodels for Chili's by the end of calendar 2025, with a long-term goal of refreshing 10% of the fleet annually. A new VP of Restaurant Development has been hired to restart the new restaurant opening program for both brands.
Technology and Simplification Unlocking Capacity
Sustained investments in technology are a key enabler of Chili's higher volumes. In FY26, the company will roll out a dramatically simplified server handheld application, removing 700 obsolete SKUs and reducing order-taking 'taps' by millions. This follows foundational upgrades to kitchen equipment (TurboChef ovens) and in-store WiFi and internet connectivity, which improve reliability and throughput.
Contradictory Data Point: Maggiano's Operating Income Flat Despite Sales Decline
While the narrative focuses on Maggiano's struggles, a contradictory data point is that its Q4 Operating Income was flat YoY at $13.4 million, even as Company Sales fell by $1.5 million. This suggests aggressive cost management or other factors are partially offsetting the traffic decline. However, the 270 bps drop in restaurant-level operating margin indicates the pressure on profitability is real and the flat operating income may not be sustainable.
Other KPIs
Stable. Margin expanded significantly by 420 basis points from 13.3% in FY24. This was primarily driven by sales leverage at Chili's, which more than offset inflation and planned investments in labor and marketing. The Q4 margin of 17.8% was down sequentially from Q2's 19.1% peak but remains at a very healthy level.
Reversing. The company has aggressively de-levered, paying down $360.3 million in long-term debt during FY25. The lease-adjusted leverage ratio now stands at a strong 1.7x. This cleanup of the balance sheet enables a pivot towards growth initiatives and shareholder returns, including a new $400 million share repurchase authorization.
Accelerating. Adjusted EPS for the full year more than doubled, growing 117% from $4.10 in FY24. This highlights the immense operating leverage generated by the sales recovery at Chili's throughout the fiscal year.
Guidance
Decelerating. The midpoint of $5.65 billion implies approximately 4.9% YoY growth. This is a significant deceleration from the 21.9% revenue growth achieved in FY25, reflecting the much tougher comparisons from the turnaround year.
Decelerating. The midpoint of $10.20 implies 14.6% YoY growth. While strong, this represents a marked slowdown from the 117% growth in FY25. The guidance embeds continued investments in labor, technology, and food quality, as well as low-single-digit commodity inflation.
Stable. This range is slightly up from FY25's actual of $265.3 million. The spending will be directed towards ramping up the reimage programs for both brands and preparing for a long-term new unit growth strategy.
Key Questions
Confidence in Lapping Historic Comps
You've guided for positive Chili's comps in every quarter of FY26. What specific product or marketing initiatives, beyond continued operational execution, give you the confidence to grow on top of the +31% comps seen in Q2 and Q3 of FY25?
Maggiano's Turnaround Timeline and Metrics
For the Maggiano's turnaround, what are the key leading indicators we should monitor over the next 2-3 quarters to gauge if the 'Chili's Playbook' is taking hold, even while headline traffic remains negative?
Capital Allocation Priorities
With the balance sheet repaired and a new $400 million buyback authorized, how will you prioritize capital between accelerating the new remodel program, restarting new unit development, and executing share repurchases in FY26?
Restaurant Margin Outlook
FY25 restaurant operating margin expanded by 420 bps to 17.5%. With revenue growth slowing and continued investment planned, is further margin expansion expected in FY26, or is the primary goal to defend the current high level?