Can Chili's Outsmart Ruby Tuesday & Red Lobster?
It's been a bad run for casual-dining chains.
Ruby Tuesday took a hit earlier this month after posting a 7.8% plunge in comps for its latest quarter. The restaurant operator is posting widening deficits, and it now expects to close 30 of its restaurants in the next few months.
Darden Restaurants is holding up considerably better, but the parent company of Olive Garden, Red Lobster, and LongHorn Steakhouse is still seeing weakness at its two flagship concepts. It plans to either sell or spin off its Red Lobster seafood chain later this year.
It's against this unsavory backdrop that Brinker International steps up to report quarterly results tomorrow morning. Unlike with Ruby Tuesday and Darden, the market's holding out for improvement in the Chili's Grill & Bar parent. Analysts see Brinker earning $0.58 a share, well above the $0.50 a share it posted a year earlier. They see modest top-line gains.
The results would be refreshing if they come in as Wall Street is expecting. It doesn't mean that Brinker is perfect. Its smaller Maggiano's concept has rattled off 15 consecutive quarters of positive comps, but there are just 44 locations of the family-style Italian eateries. Chili's remains the lone needle-mover here with 1,552 restaurants, and, unfortunately, it posted negative comps in its prior quarter.
Then again, the 1.9% systemwide dip in comps that Chili's posted in its previous quarter is a relative victory when pitted against the larger number of patrons who are staying away from Ruby Tuesday and Red Lobster.
Chili's has been successful with its shared meal deals and somewhat steady menu. It hasn't had to revamp its offerings the way that Red Lobster and Ruby Tuesday have to woo new diners. However, given the negative reactions to what Darden and Ruby Tuesday had to say, it will be a lot more comforting after Brinker proves that it can meet, if not exceed, Wall Street's optimism tomorrow morning.
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The article Can Chili's Outsmart Ruby Tuesday & Red Lobster? originally appeared on Fool.com.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Darden Restaurants. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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