Shares of Brinker International (NYSE:) gained 4% in pre-open trading Friday after the stock was upgraded at Stifel after the firm recently hosted investor meetings with management and came away more bullish on turnaround efforts at Chili’s.
Stifel analysts upgraded Brinker to Buy from Hold while lifting their price target to $45 from $38. The new price target suggests about 45% upside from Thursday’s closing price.
“We believe Brinker’s plan mirrors the strategic playbook of successful restaurant turnarounds, such as Olive Garden, Popeyes, and KFC,” the analysts commented. “Chili’s greatest challenges are operational, with several opportunities to implement changes during the next few quarters that should improve team members’ and customers’ experiences.”
Further, analysts said CEO Kevin Hochman is reshaping Brinker’s culture, urging leaders to gather insights from frontline staff for system-wide operational enhancements.
“Under CEO Kevin Hochman’s leadership, the company is evolving toward a more servant leadership culture that encourages team members to have a growth mindset,” the analysts commented. “This is a meaningful shift for an organization that has operated for years with a centralized, top-down decision-making process with functions encouraged to stay in their area of responsibility (i.e., silo).”
Adding to their comments about the Chili’s turnaround, the analysts highlight that many casual dining chains struggle with differentiation. Chili’s aims to enhance brand management and operational execution for its Core 4 items (chicken tenders, fajitas, burgers, margaritas), a key focus being reducing turnover and improving workflow rather than wage increases.