Revenue Rises, Sales Decline at Brinker International
Brinker International, Inc. announced results for the fiscal fourth quarter ended June 29.
Highlights include the following:
In 2016, the fourth quarter and fiscal year included an additional operating week (53rd week) compared to fiscal 2015.
Brinker International total fourth quarter revenues increased 15.4 percent to $881.7 million compared to the fourth quarter of fiscal 2015 and company sales increased 15.8 percent to $855.4 million compared to the fourth quarter of fiscal 2015, primarily attributable to the 103 restaurants acquired with the Pepper Dining transaction in the first quarter of fiscal 2016 as well as the additional operating week in the fourth quarter of fiscal 2016.
Chili's fourth quarter company-owned comparable restaurant sales decreased 1.8 percent.
Maggiano's fourth quarter comparable restaurant sales decreased 1.7 percent.
Chili's franchise fourth quarter comparable restaurant sales decreased 3.4 percent, which includes a 2.1 percent and 5.5 percent decrease for U.S. and international franchise restaurants, respectively.
Restaurant operating margin, as a percent of company sales, declined around 20 basis points to 18.3 percent compared to 18.5 percent for the fourth quarter of fiscal 2015.
For fiscal 2016, cash flows provided by operating activities were $394.7 million and capital expenditures totaled $112.8 million. Free cash flow was approximately $281.9 million.
"We ended the fiscal year with improving trends and have returned to gaining share in the industry," says Wyman Roberts, chief executive officer and president. "We are also encouraged by the early results of our fiscal year 2017 initiatives. The strong cash flow generation of our business model gives us confidence to increase our leverage and return additional capital to shareholders."
Chili's company-owned comparable restaurant sales includes 103 Chili's restaurants acquired from a franchisee in the first quarter of fiscal 2016.
Reclassifications have been made between pricing impact, mix-shift and traffic in the prior year to conform with current year classification.
System-wide comparable restaurant sales are derived from sales generated by company-owned Chili's and Maggiano's restaurants in addition to the sales generated at franchise operated restaurants.
Chili's fourth quarter company sales increased 17.1 percent to $747.3 million from $638.2 million in the prior year primarily due to an increase in restaurant capacity resulting from the acquisition of 103 Chili's restaurants on June 25, 2015 as well as the additional operating week, partially offset by a decline in comparable restaurant sales. As compared to the prior year, Chili's restaurant operating margin declined primarily due to the impact of the acquired restaurants. Restaurant labor, as a percent of company sales, increased compared to the prior year due to higher wage rates. Cost of sales, as a percent of company sales, increased due to unfavorable menu item mix and commodity pricing primarily related to steak, partially offset by increased menu pricing and favorable commodity pricing related to burger meat. Restaurant expenses, as a percent of company sales, decreased due to leverage related to the additional operating week, lower workers' compensation insurance expenses and decreased advertising.
Maggiano's fourth quarter company sales increased 7.9 percent to $108.1 million from $100.2 million in the prior year primarily due to an increase in restaurant capacity as well as the additional operating week, partially offset by a decline in comparable restaurant sales. As compared to the prior year, Maggiano's restaurant operating margin improved. Restaurant expenses, as a percent of company sales, decreased compared to prior year due to leverage related to the additional operating week as well as lower advertising and workers' compensation insurance expenses. Cost of sales, as a percent of company sales, was positively impacted by increased menu pricing and favorable commodity pricing, partially offset by menu item changes. Restaurant labor, as a percent of company sales, increased compared to prior year due to higher wage rates, partially offset by lower incentive bonus.
Franchise and other revenues increased 2.1 percent to $26.3 million for the fourth quarter compared to $25.8 million in the prior year driven primarily by higher royalty revenues related to Chili's retail food products and revenues associated with tabletop devices, partially offset by a decrease in royalty revenues resulting from the acquisition of 103 Chili's restaurants from a former franchisee. Brinker franchisees generated approximately $341 million in sales for the fourth quarter of fiscal 2016.
Depreciation and amortization expense increased $2 million for the quarter primarily due to depreciation on acquired restaurants, asset replacements and new restaurant openings, partially offset by an increase in fully depreciated assets.
General and administrative expense decreased approximately $0.6 million primarily due to lower performance-based compensation, partially offset by payroll expenses related to the additional operating week.