Brinker International, Inc. EAT demonstrated resilience in fiscal 2026, expanding profitability despite persistent inflationary pressures. The company reported fiscal fourth-quarter restaurant operating margins of 18%, up 20 basis points year over year. Sales leverage was the primary driver, helping offset higher food, advertising and insurance costs. Food and beverage expenses increased 80 basis points amid 4.4% commodity inflation, while labor costs benefited from strong sales growth despite roughly 3.1% wage inflation.
The momentum was particularly notable at Chili’s. Fiscal fourth-quarter comparable sales increased 5.6%, supported by 1.5% traffic growth. Management also said July sales and traffic accelerated meaningfully, suggesting the brand entered fiscal 2027 with solid momentum. The Big Crispy Chicken Sandwich, everyday value offerings and operational improvements are helping attract and retain guests.
There could be further room for margin expansion. Management expects 20-40 basis points of restaurant-level margin improvement on a 52-week basis in fiscal 2027, potentially reaching 50 basis points with the benefit of the 53rd week. Importantly, the company has built relatively conservative inflation assumptions into its outlook, leaving potential upside if sales outperform or costs moderate.
EAT also believes its restaurants retain capacity to accommodate more traffic, while higher average unit volumes could support additional leverage. However, management plans to reinvest part of the gains into guest experience rather than maximize near-term flow-through.
With fiscal 2027 guidance of $12.60-$13.40 per share and continued sales momentum, EAT appears positioned for further earnings growth if execution remains strong.
Darden and Texas Roadhouse Also Show Margin Resilience
Darden Restaurants DRI and Texas Roadhouse TXRH are two notable casual-dining peers that provide useful benchmarks for Brinker as investors assess margin expansion amid inflation. The company’s diversified portfolio and scale provide an advantage in managing labor, food and operating costs. Darden’s trailing operating margin stood at about 12.2%, above EAT’s 10.8%, highlighting its strong profitability profile.
Texas Roadhouse, meanwhile, has demonstrated resilience despite exposure to beef and other commodity costs. With an operating margin of about 7.9%, Texas Roadhouse’s revenue growth remained strong, reflecting continued consumer demand.
For EAT, the key differentiator is its improving margin trajectory. Management expects restaurant-level margin expansion in fiscal 2027 despite incorporating low-single-digit commodity and wage inflation. If sales momentum remains strong and inflation eases faster than anticipated, EAT could potentially outperform its margin outlook.
EAT’s Price Performance, Valuation and Estimates
Brinker’s shares have gained 67.4% over the past six months, against the industry’s 11.7% decrease.
Price Performance
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In terms of its forward 12-month price-to-earnings ratio, EAT is trading at 17.25, down from the industry average of 22.14.
P/E (F12M)
Image Source: Zacks Investment Research
Over the past 30 days, the Zacks Consensus Estimate for EAT’s fiscal 2026 earnings per share has increased, as shown in the chart.
Image Source: Zacks Investment Research
EAT currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).