Citigroup: Cost and Customer Base Improvement, upgraded Brinker International, Inc. (EAT.US) rating to "Buy"

Citigroup Research has published a research report, upgrading Brinker International, Inc. (EAT.US) from a "neutral" rating to a "buy" rating, while also raising the target price by 22% to $176. The firm pointed out that the strong performance of Chili's, the core brand under this restaurant group, the improved cost outlook for Brazilian beef imports, and the significant effectiveness of measures to attract young customers are the core factors supporting the rating upgrade. Citigroup analyst Jon Tower said, "Indeed, we are a bit late in taking a positive stance on Brinker International, Inc., but based on the continued improvement in the cost environment and strong sales fundamentals, we believe that its growth story is still sustainable." Tower added that this rating upgrade is mainly based on three key positive factors: first, the US lifting the 40% tariff on Brazilian beef imports, removing the "core pressure point" of food inflation for Chili's, is expected to boost the company's profit margin for the fiscal year 2026. Secondly, Chili's customer conversion strategy has been significantly effective, with young consumers flocking in. Despite a 150% increase in media marketing spending accompanying this achievement, customer conversion data shows that these new customers have "high stickiness", confirming the brand's long-term relevance among young people and giving the market more confidence in customer flow growth for fiscal year 2026 and beyond. Finally, the analyst believes that the company is fully capable of handling sustained growth in customer traffic - even considering the recent rebound in customer traffic, the average annual customer service volume per store is still about 17% lower than in fiscal year 2007, indicating ample room for growth. Despite Brinker International, Inc. regaining all lost ground after releasing its third-quarter financial report, Tower remains optimistic about its potential for further upside. He said, "The improvement in core customer satisfaction and key performance indicators (KPIs), coupled with the increase in customer loyalty, have laid a foundation for the brand to continue outperforming the industry average and its own historical performance." At the close of trading on Tuesday, Brinker International, Inc. continued its upward trend, rising about 7% on top of a cumulative 11% increase over the past three trading days.