EAT Brinker International Inc

Brinker International Inc.'s (EAT) fiscal third-quarter earnings rose, though the company's flagship Chili's Grill & Bar chain continues to struggle attracting customers without its most aggressive discounts.

As a result, Brinker's quarter came in toward the low end of its updated guidance from last month, disappointing investors expecting more-promising results from Chili's as the broader casual-dining industry pieces together a recovery. Shares fell 58 cents, or 2.9%, in recent trading to $19.74.

Chili's is facing a formidable challenge in trying to keep customers who had become accustomed to dining for a bargain to keep coming in when the deals go away. The chain hopes a revamped menu with a new method for cooking ribs, improved burgers and new items like tacos can eventually be enough attract customers and their dollars.

For now, Chili's is in a transition. In the last quarter, Chili's ended its aggressive "3 for $20" deal of two entrees and an appetizer and dessert to split and replaced it with "Fresh Pairings" of an entree and appetizer for $9.99, a deal less-frequent customers weren't responding to strongly.

"As the deal went away, the catalyst for trial lessened quicker than we could convert the light users of the promotion into more frequent guests," Chili's President Wyman Roberts said Tuesday during a conference call with analysts.

Chili's same-store sales fell 5% in the quarter, exposing what will likely be a bumpy ride for the chain during the transition. Brinker executives said that while they want Chili's to become less reliant on deals to bring in customers, it may have to respond to competitors deals, which could interrupt the plan.

"Turning a ship as large as Chili's is not a task you want to do quickly as you might end up somewhere other than you wanted to be," Roberts said. "We must change the business the hard way, the right way."

Chili's brand is becoming more of a focal component of Brinker, especially after the company last month agreed to sell its On the Border chain to a private-equity firm for $180 million. The deal will leave Brinker with Chili's 1,500 restaurants and about 45 Maggiano's Little Italy locations.

Longer-term, Brinker plans to embark on a plan to double its per-share earnings over the next five years as it improves margins at Chili's through a revamp of its kitchen layout, expands internationally, and boosts its higher-end Maggiano's restaurants by a third.

Brinker reported a profit of $40 million, or 39 cents a share, up from $35 million, or 34 cents a share, a year earlier. Earnings excluding downsizing and other charges fell to 42 cents from 45 cents a share. The company last month projected 41 cents to 44 cents, above analysts' then-views.

Revenue decreased 7.8% to $713.4 million while same-store sales dropped 4.2%.

Analysts polled by Thomson Reuters recently expected $791 million.

Cost of sales as a percentage of revenue rose to 28.5% from 28.2%, which included a $5 million impact from rolling out Chili's new menu.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com

(Tess Stynes and Nathan Becker contributed to this article)

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