Brinker International Inc.EAT

Morningstar Rating

Stock Research and Analysis

by Zoe Tan

After a decade of rapid expansion and portfolio diversification, Brinker has spent the last five years paring back its store base by selling off previously acquired chains like Macaroni Grill, Corner Bakery, Cozymel's, and Big Bowl. We believe this Read more

Bulls Say

Chili's is a leader in casual dining, with nearly 1,500 restaurants worldwide. The 33-year-old chain is well known, with 94% of consumers aware of the Chili's brand.

With a decent balance sheet and solid cash flow, Brinker should be able to weather the current downturn and emerge a stronger player, as weaker chains and independents close up shop.

Brinker has significant opportunity for international expansion because of the growing middle class in emerging markets. The company currently has 201 existing restaurants in 27 foreign countries.

Spending at casual dining restaurants should get a boost in the long run from maturing baby boomers entering their peak earning years, population growth, and an increasing desire for convenience in a time-pressed society. Read more

Bears Say

The restaurant industry is plagued by constantly changing consumer preferences and intense rivalry. We believe this makes it difficult for Brinker to build a sustainable competitive advantage in the industry.

A prolonged economic downturn could pressure Brinker's core customer base of middle-income consumers. In the wake of tightening credit, a slumping housing market, and increasing unemployment, the company's sales and profitability could be depressed for many years.

Management failed to turn around the long-struggling Macaroni Grill chain, which resulted in a substantial write-down, before recently selling a majority stake.

A change in prevailing health or dietary preferences and perceptions could cause some consumers to avoid Brinker's restaurants. Read more

Strategy

Management has been working to enhance value, convenience, and speed for its guests. Brinker has also been taking steps to reduce capital expenditures and expenses by adding more franchised locations Read more

Management

Brinker is led by a seasoned management team. The top executive, Douglas Brooks, started as an assistant manager in 1978 and became president in January 1999, CEO in January 2004, and chairman in November 2004. Todd Diener, who has been with the company Read more

Profile

As of June 2009, Brinker operated or franchised 1,689 casual-dining restaurants in every U.S. state and 27 foreign countries. Chili's Grill & Bar is the flagship brand Read more

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