Leaders from Brinker International, Inc. provided an update on the company's fiscal 2013 outlook and shared long-term goals being discussed in the February 27 investor conference.
"Brinker expects to deliver on our promise of doubling earnings per share. This could happen by fiscal 2014, a full year earlier than initially projected," says Wyman Roberts, CEO and president of Brinker International. "We're now looking to the next milestone by setting another long-term goal: to double our fiscal 2012 earnings per share by fiscal 2017. This is yet another aggressive goal, but we are committed to attaining it by driving 10 to 15 percent annual EPS growth during this period."
The business strategies for the next five years build upon the foundation of Brinker's current successes. The company has evolved to operate in a mature space by reducing costs in the middle of the P&L while reinvesting back into the business with initiatives that enhance the guest experience. Moving forward, the company will continue to have a balanced approach to doubling EPS, with topline initiatives playing a greater role in overall growth.
Chili's Grill & Bar will focus on food innovation, improved operational consistency, and moderate unit growth. Maggiano's Little Italy will leverage a new restaurant prototype to grow their brand. The global side of the business will step up unit development to become the guests' top choice for casual dining internationally.
Brinker projects 3 to 5 percent revenue growth, driven by 2 to 3 percent domestic comp sales growth, and approximately 3 percent international comp sales growth. Starting in fiscal 2014, the company projects unit growth of 1 to 2 percent for Chili's in the U.S., 5 to 10 percent for Maggiano's, and ongoing 10 to 15 percent global growth.
Brinker will generate up to 1 percent annual margin improvement, driven by sales leverage on restaurant labor and restaurant expenses, continued emphasis on labor productivity improvements, and flat cost of sales.
The company expects to continue to generate strong cash flow and maintain a consistent strategy regarding the prudent allocation of capital. This will add to Brinker's commitment to return cash to shareholders through a competitively favorable dividend, and at least $1 billion of share repurchase over the next five years.
The combination of focusing on these outlined strategies will result in Brinker delivering annual EPS growth of 10 to 15 percent and doubling EPS to at least $4.00 per share by fiscal 2017.
The company anticipates earnings per diluted share, before special items, to be at the lower end of the guidance range of $2.30 to $2.45, for fiscal 2013 EPS. Comparable restaurant sales are now projected to be approximately 1 percent for fiscal 2013 reflecting a softer sales environment in the third quarter as guests adjust to lower discretionary income resulting from higher payroll taxes, gas prices, and the delay in the disbursement of federal tax refund checks.
Cost of sales as a percentage of company sales is estimated to be 50 basis points better year over year, driven by better than expected commodity inflation and lower actual versus theoretical food costs. Restaurant labor is projected to improve 50 basis points compared to fiscal 2012 due to better productivity related to rollout of new kitchen equipment. The company continues to expect operating margins to improve 100 basis points compared to fiscal 2012. Brinker's diluted weighted average share count is expected to be between 73 and 75 million shares for fiscal 2013.
As of February 25, quarter to date comp sales at Chili's is running at negative 2.2 percent, sales at Maggiano's are essentially flat, and sales in the Global system are up 4.1 percent.