• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

In contrast to our view on MCD which trends are taking it into a “deep hole” EAT is headed to “nirvana.”   Ultimately this has implication for the trends in valuation. 

While EAT sales remain challenged (adjusting to reflect the one week calendar shift) company-owned comparable restaurant sales were (3.7), (4.9) and (4.1) percent for October, November and December, respectively, resulting in (4.1) percent for 2Q11.  We believe that the worst is over for EAT from a top line perspectives and the company initiatives to drive top line sales will take Brinker's same-store sales into positive territory for the balance of fiscal 2011.

Specifically, as I wrote in my post titled, "EAT - A BADGE OF HONOR", on November 14th, the following three points are pivotal to EAT's second half of fiscal 2011.

  1. Chili’s is lapping the introduction of menu changes that caused sales to decline last year
  2. “2 for $20” is to become permanent menu item; this will be incremental to sales in 2HFY11
  3. In January, Chili’s will be rolling out a new lunch menu focused on gaining traction in a day part that has been challenging for the company.

More details after the call at 10am.

EAT: NIRVANA BOUND - eat quadrant

Howard Penney

Managing Director