S&P revises Brinker outlook to positive on traffic growth and lower debt
S&P revises Brinker outlook to positive on traffic growth and lower debt
S&P Global Ratings has revised its outlook on Brinker International Inc (NYSE:EAT) to positive from stable, signaling potential upward momentum for the restaurant operator as robust traffic growth and debt reduction strengthen its credit profile. At the same time, the rating agency affirmed the Dallas-based company’s 'BB+' issuer credit rating, pointing to above-industry-average operational performance and a formal commitment to maintain lower debt levels.
The outlook upgrade highlights Brinker’s operational momentum, driven largely by sustained market share gains at its flagship Chili’s Grill & Bar brand. S&P-adjusted leverage improved to 1.6x for fiscal 2026 from 1.8x in the prior year, bolstered by solid earnings growth and a newly established financial policy targeting leverage below 2.0x.
Chili’s has consistently outperformed the broader casual dining sector by leveraging value-oriented marketing and menu simplification to attract cost-conscious diners. That strategic focus supported a three-year revenue compound annual growth rate of roughly 12%, with Chili's posting same-restaurant sales growth of 23% in fiscal 2025 and 9% in fiscal 2026.
Against a backdrop of persistent wage and commodity inflation, Brinker expanded its S&P-adjusted EBITDA margin by 60 basis points to 18.4% in fiscal 2026. Strong top-line expansion combined with labor retention initiatives enabled the operator to generate operating leverage and offset rising input costs across beef and utilities.
Looking ahead, S&P projects annual revenue growth of 4% to 6% over fiscal 2027 and 2028, anchored by steady same-restaurant sales expansion and accelerated unit growth. Expected annual free operating cash flow of $500 million to $550 million should comfortably fund restaurant remodels and shareholder buybacks while preserving balance sheet flexibility.
While Brinker used its revolving credit facility to retire a $350 million bond, S&P noted the company has yet to establish a long-term track record under its updated financial policy. An eventual credit upgrade hinges on Brinker maintaining leverage below 2.0x or enhancing its business scale and concept diversification over the medium term.