Lower gas prices will spice up sales this summer at Brinker International’s Chili’s restaurant chain, says Gary Bradshaw, portfolio manager for the Hodges Small Cap Fund. ‘With energy prices down – and we think they will stay lower for longer – the consumer has more money in his pocket and he is going to go out to eat at a lot of these restaurants,’ says Bradshaw. Bradshaw adds that Brinker’s stock is relatively inexpensive, trading about 15 times full year 2016 earnings, which he expects will grow 15% to 16% per year. Shares of Brinker, which sports a dividend yield of 2%, are down 5% year-to-date. Cracker Barrel is another restaurant chain that will see a sales boost due to the drop in gas prices in Bradshaw’s opinion. Shares of the company, which has over 630 stores along the interstate highway, are flat so far in 2015 after rising over 30% in 2014. ‘Their last quarter was fabulous with 7% same store sales growth. We think that continues,’ says Bradshaw. ‘We think their earnings will grow 16% to 17% and that 3% dividend yield makes it attractive as well.’
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