-- Brinker International's stock fell by nearly 7% on Wednesday after reporting selected business results on Tuesday
-- Its restaurant operating margin, as a percentage of company sales, was down 10.4% from 11.6% in the first quarter of fiscal 2021
-- Brinker CEO Wyman Roberts attributed the surge in COVID cases, in August, to the lower profits
Brinker International’s shares fell by nearly 11% in pre-market trading on Wednesday, after the restaurateur reported the impact of labor and commodity shortages on its profit margins.
The owner of a popular fast-food chain, Chili’s bar and grill, announced selected business results for the first quarter of fiscal 2022.
The company’s restaurant operating margin, as a percentage of company sales, was down 10.4% from 11.6% in the first quarter of fiscal 2021. The primary drivers of the decline in restaurant operating margin were 150 bps of higher restaurant labor costs and 60 bps of higher commodity costs, Brinker reported.
Sales increased to $859.6 million in the first quarter from $728.2 million, a year ago. In the company’s official statement, Brinker CEO Wyman Roberts attributed the surge in COVID cases, in August, to the lower profits.
“Brinker’s first quarter delivered positive sales and continued to significantly outpace the industry in traffic. But the COVID surge starting in August exacerbated the industry-wide labor and commodity challenges and impacted our margins and bottom line more than we anticipated,” he said.
Earnings per share, excluding items was reported as 39 cents, falling way below industry estimates of 69 cents per share.
INDUSTRY STATUS CHECK
Investors expect the issues reported by Brinker International to reflect in the earnings reports of other restaurateurs. This was reflected in a drop in shares of Darden Restaurants and Cheesecake Factory.
Darden’s shares fell by nearly 2%. At12:49 PM ET, they were trading 1.1% lower at $144.88 apiece. Cheesecake Factory’s stock fell by 3% but recovered during midday trading and was up 0.28% to $42.74 at 12:51 PM ET.
Meanwhile, popular pizza chain, Dominoes’ third-quarter results recorded its domestic same-store sales turn negative for the first time since 2011. Its U.S. same-store sales shrank by 1.9%, although the metric was up by 15.6% on a two-year basis.
CEO Ritch Allison said “a very challenging staffing environment” put pressure on U.S. transactions. “There is no doubt that we will continue to experience challenges with Covid, with staffing and other factors.
“We also expect inflationary headwinds to continue impacting Domino’s and the broader restaurant industry over the coming quarters, but we will face all of these challenges and headwinds from a position of strength,” he said.
Domino's shares were down by 1.09%, trading at $460.27 at 12:56 PM ET.
CNBC reported that Brinker’s stock has fallen 22% this year, dragging its market value down to $2.02 billion. The company is expected to report its full fiscal first-quarter results on November 3. At 2:01 PM ET, Brinker’s stock was trading 6.72% lower at $45.66.