Brinker: Provides Business Update In Response To Covid-19

Dallas / TX . (bi) Brinker International Inc. and its brands, «Chili’s» Grill + Bar and «Maggiano’s Little Italy», have adapted their business model to take-out and delivery to deliver a safe and quality experience for team members and guests during the coronavirus (Covid-19) pandemic. Brinker’s strategic decision to enhance its off-premise business over the last few years including online ordering, mobile app, curbside service and third-party delivery, has enabled its brands to conveniently serve a significant increase in off-premise guests during this pandemic.

Comparable Restaurant Sales

The table below presents the percentage change in company-owned comparable restaurant sales for the third quarter before the Covid-19 impact and for the entire third quarter:

Comparable Restaurant Sales (1) Q3: 2020 versus 2019thru 3/8 Q3: 2020 versus 2019QTR end
Company-owned 2.9 % (5.9) %
Chili’s 3.3 % (5.3) %
Maggiano’s 0.6 % (9.9) %

(1) Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 months, except restaurants acquired by the company from franchisees are not included until they have been company-owned for more than 12 months. Amounts are calculated based on comparable current period versus same period a year ago.

Operational Perspective

As Chili’s and Maggiano’s operate in an off-premise only model, below are some initial results related to company owned restaurants:

  • Off-premise sales have more than doubled year-over-year and are capturing 30-35 percent of prior year company sales
  • In the most recent week for which industry data is reported, Chili’s comparable restaurant sales gapped the industry by more than 10 percent
  • Delivery is now approaching 20 percent of total sales. Online ordering at Chili’s accounted for 69 percent of all off-premise orders
  • Virtually all restaurants remain open for to go and delivery, with closures totaling less than 10

«I’m proud of our restaurant operators and support teams who quickly adapted our business to a safe and efficient off-premise only model. Our focus remains delivering quality food to our guests and maintaining a safe work environment for our team members,» said Wyman Roberts, chief executive officer of Brinker International. «Our hearts go out to those impacted by the pandemic, including our team members. In response, we’ve provided them support through an emergency relief fund.»

The company and its board of directors have also taken the following proactive measures to provide enhanced financial flexibility during the Covid-19 pandemic:

  • Amended the revolving credit facility to obtain financial flexibility and liquidity. Initial borrowing capacity under the new amendment is USD 800 million
  • Significantly reduced capital expenditures, including suspending the Chili’s re-image program and delaying construction of new restaurants
  • Reduced salaries, led by the executive team including a 50 percent reduction for Chief Executive Officer
  • Reduced marketing spend, general and administrative spend and other restaurant expenses to support the off-premise only business model
  • Suspended the quarterly cash dividend and all share repurchase activity

Given these current sales levels and reductions in expenses, Brinker anticipates a cash burn level of less than USD 10 million per week. Total cash on the balance sheet on March 31, 2020 was USD 137 million and total liquidity was USD 237 million. We believe we have ample liquidity with our current capital position and will continue to evaluate all financing alternatives, including funds available under the CARES Act, as we navigate through this evolving situation.

The company is withdrawing its financial guidance for fiscal 2020 as a result of conditions arising from Covid-19.