Brinker International (EAT) Q1 2027 earnings review
Chili's diner traffic jumps, so Brinker raises its annual outlook
Brinker International, the owner of Chili's and Maggiano's restaurants, grew fast as diners packed its bar-and-grill locations while skipping its Italian chain. Sales at Chili's stores open at least 18 months jumped 10% on top of a 21% gain a year ago, lifting restaurant profit margins and boosting profit per share excluding one-offs by 44%. Chief executive Kevin Hochman raised the full-year outlook, though by our math the plan still points to revenue growth slowing to 5% for the rest of the year without the extra calendar week.
| Sales at restaurants open a year ago | +9.1% Chili's +10.1%, Maggiano's -3.4% |
|---|---|
| Total revenue | $1,475.6M +9.4% from a year ago |
| Profit per share, excluding one-offs | $2.77 +44% from a year ago |
| Full-year revenue outlook | Raised $70M middle of the range: 6% growth without 53rd week |
⚖️ Verdict: 🟢 Bullish
The story got better because Chili's cleared its hardest comparison of the year with 6% customer traffic growth, proving its turnaround is holding and keeping food costs in check. The bad news: Maggiano's traffic fell 5% and the chain lost money again, showing the Chili's playbook is still not working there.
The question now is whether the raised full-year outlook is just management being cautious again or a sign that diner spending will cool. If the plan is just cautious, easier comparisons ahead will bring another raise; if diners pull back, growth will drop toward the 5% pace implied by the forecast. Second-quarter traffic during the holiday season will tell.
🐂 Bull Case
Chili's Grew Double Digits Against Its Toughest Comparison
The biggest test for Brinker this year was whether Chili's, its flagship bar-and-grill chain, could keep growing against last year's 21.4% jump in comparable sales. Chief executive Kevin Hochman said "Chili's delivered its 22nd consecutive quarter of same-store sales growth, up +10%, lapping a +21% from last year and a +14% from 2024 for a 3 year cumulative comp of +52%." The restaurant group passed its hardest comparison of the year and raised its full-year revenue and profit outlook.
More customers walked through the doors, which drove the beat. Foot traffic at company-owned Chili's rose 6.4%, while menu prices added 3.7%. Brinker credited service improvements and the "highly successful launch of our Big Crispy" chicken sandwich for bringing new and repeat diners in. Because customer visits rather than price hikes drove the gain, the growth looks durable.
What to watch: Chili's customer traffic in the second quarter, when the chain rolls out a new host-stand program to seat guests faster. Holding traffic growth above 3% would show the chicken sandwich and faster seating are keeping dining rooms full.
Higher Guest Traffic Lifted Restaurant Margins
Rising beef costs and diners ordering cheaper items threatened to squeeze restaurant profit margins this quarter. Instead, restaurant operating margin — profit at the store level before corporate overhead and depreciation — rose 1.5 percentage points to 17.7% of company sales. Busy kitchens spread fixed wages over more meals, so restaurant labor fell 0.9 percentage points to 31.4% of company sales, by our math.
Other restaurant expenses, such as rent and utilities, also dropped 0.7 percentage points to 25.0% of company sales. Food and beverage costs — what the chain pays for ingredients — edged up just 0.1 percentage points to 25.9% of sales. Product mix — the shift in which menu items guests order — was 0.0% at Chili's, so the Big Crispy sandwich did not hurt margins.
What to watch: food and beverage costs as a share of company sales in the second quarter. A reading at or below 25.8% would confirm that menu prices are covering meat and produce inflation.
Buybacks and Note Payoff Boost Per-Share Profit
Brinker uses its cash flow and credit line to buy back stock and refinance debt, which lifts profit per share but raises exposure to floating interest rates. In the first quarter, the Dallas-based company "lowered its cost of capital by redeeming the outstanding $350.0 million 8.25% notes using funding from the revolving credit facility." That payoff triggered a $17.6 million one-off charge, but by our math it cut ongoing quarterly interest costs to $7.0 million from $10.5 million a year ago.
At the same time, management spent $165.2 million on treasury stock, including $125.0 million funded directly from operating cash flow. Those purchases reduced the diluted share count by 6.1% from a year ago to 43.0 million, turning a 34.6% rise in net profit excluding one-offs into a 43.5% jump in profit per share. Long-term debt rose 7.5% from last quarter to $451.0 million and cash fell by $79.3 million, so net borrowing increased, but lower interest bills show the trade-off is paying off so far.
What to watch: quarterly interest expense and credit line borrowings in the second quarter. Interest costs staying near $7 million would show that share buybacks are not driving debt costs back up.
🐻 Bear Case
Maggiano's Sales Keep Falling as Diners Stay Away
While Chili's grows, Brinker's smaller Italian-American chain, Maggiano's Little Italy, continues to lose diners under its turnaround plan. Sales at Maggiano's restaurants open at least 18 months fell 3.4% from a year ago, on top of a 6.4% drop in the same quarter last year. Foot traffic fell 5.1%, which a 2.0% menu price increase could not offset.
Total Maggiano's revenue shrank 4.6% to $94.9 million, and the chain posted a GAAP operating loss of $3.6 million. Store-level operating margin excluding one-offs improved by 0.7 percentage points to 3.1% of company sales only because the chain cut advertising and delivery costs. Cutting marketing while customer visits are falling risks deeper sales declines ahead.
What to watch: Maggiano's customer traffic during the second-quarter holiday banquet season, its biggest profit period of the year. Another traffic drop worse than 5% would show the turnaround plan is not working.
The Raised Outlook Still Points to a Slowdown
Hochman said the "Chili's flywheel of sustainable growth and market share gains keeps spinning" as the company lifted its full-year revenue forecast by $70 million at the middle of the range. Yet the math inside that updated plan still points to slower growth across the casual dining market for the rest of the year. First-quarter revenue rose 9.4% to $1,475.6 million.
By our math, the new full-year target of $6.23–6.33 billion leaves 7.8% revenue growth for the remaining three quarters. Excluding the extra 53rd operating week in the fourth quarter, which management says adds about 2% to annual revenue, implied growth for the rest of the year drops to 5.0% by our math — nearly half the first quarter's pace, even though prior-year comparisons get easier.
What to watch: whether management raises the full-year revenue target again in the second quarter. Leaving the forecast unchanged after another strong quarter would mean consumer demand is actually cooling.
Risks this quarter didn't answer
Several standing questions about store investments and operations got no new numbers in the earnings release, though management may address them on the conference call or in the quarterly filing.
- Chili's store remodels: no count of completed remodels in the first quarter against the full-year target of 60 to 80 locations.
- Remodel cost and sales lift: the press release gave no figures from the September Investor Day on what each remodel costs or how much it boosts sales.
- New company-owned stores: zero company-owned Chili's opened in the first quarter toward the full-year plan of four openings.
💲 Other KPIs
Free cash flow — operating cash left after paying for kitchen equipment and store remodels — rose 70% from a year ago to $105.7 million, or 7.2% of revenue by our math. Higher restaurant profit drove operating cash flow up 40% to $169.1 million, easily covering $63.4 million of capital spending.
Total restaurants across the system rose by 6 from last quarter and 11 from a year ago to 1,641. Franchisees opened 10 Chili's locations (9 international, 1 US), while Brinker paid $27.1 million to buy 12 US Chili's stores from a franchisee, shifting them into the company-owned count.
🔮 Guidance
Raised. The middle of the range moved up $70 million to $6.28 billion, or 8.1% growth from last year by our math (6.0% excluding the 53rd week). That leaves 7.8% growth for the rest of the year, or 5.0% without the extra week, down from 9.4% in the first quarter.
Raised. The middle of the forecast rose $0.60 to $13.60 per share, which means 26.6% growth for the year by our math (20.1% excluding the $0.70 benefit from the 53rd week). By our math, that leaves 22.9% growth for the rest of the year, or 15.0% without the extra week, after 43.5% in the first quarter.
Unchanged. The spending plan stays at $275 million at the middle of the range, up 18.6% from last year's $231.9 million as the chain remodels more Chili's dining rooms. First-quarter spending of $63.4 million leaves $211.6 million for the rest of the year by our math.
Unchanged. The share count target stays at 42.5 million at the middle of the range, down 5.1% from last year's 44.8 million average. First-quarter diluted shares already reached the top of the range at 43.0 million after $165.2 million of stock buybacks.
❓ Key Questions
What did the September Investor Day set for remodel costs?
Brinker hosted an Investor Day in September and plans 60 to 80 Chili's remodels this year, but the earnings release did not state the cost per store or the expected sales lift.
How much did beef and produce inflation rise in Q1?
Ingredient costs stayed flat at 25.9% of company sales, but the release did not give the exact commodity inflation rate to test against the 4% first-quarter rate management previously indicated.
When will Brinker stop losing money at Maggiano's?
Maggiano's posted a $3.6 million operating loss as foot traffic dropped 5.1%. Investors need to know what traffic or profit milestone would trigger store closures or a sale of the chain.
How much debt will Brinker carry to fund stock buybacks?
Borrowings on the credit line funded both the $350 million note payoff and share repurchases, pushing net debt up by $111 million in one quarter.