An ad campaign targeting the fast-food chain and a TikTok viral appetizer helped Chili’s same-store sales grow nearly 15% in the latest quarter.
But parent company CEO Kevin Hochman Brink Internationaltold CNBC the chain’s strong results are just a sign that customers are finally waking up to the chain’s two-year turnaround.
Brinker’s shares are up 53% this year, giving it a market value of $2.99 billion. However, the company closed down 10.7% on Wednesday as its profit fell short of expectations, disappointing analysts. Conservative outlook for fiscal 2025.
The stock was up 7% in afternoon trading Thursday, rebounding from what BMO Capital Markets called an “overreaction” by investors. KeyBanc Capital Markets also upgraded the stock Thursday, saying its quarterly results were misinterpreted.
Forecasts aside, Chili’s even made StreetAccount’s forecast for same-store sales growth of 8.6% appear cautious. Its 14.8% same-store sales growth makes it a rare company, joining Chipotle and wing stop At a time when many consumers are cutting back on spending, a handful of public restaurants are reporting strong traffic and same-store sales growth, putting pressure on the industry. Chili’s casual dining competitors, such as Applebee’s, are owned by Catering brandand bloom brand Outback Steakhouse has reported lower same-store sales in recent quarters.
“This is just another big change for the business,” Hochman said. “I think the sky is the limit for this brand.”
Hochman said about 60% of Chili’s growth in the most recent quarter came from its $10.99 Big Smasher meals. The chain promoted the deal by targeting fast-food rivals in television ads.
“We capitalized on this insight we saw on social media a few months ago, that customers were upset about where fast-food prices were going,” Hodgman said. “The ad clearly tapped into that.”
Another successful menu item at Chili’s this season is the Triple Dipper, which gives diners a choice of three appetizers and dipping sauces. In May, the project went viral on TikTok. Hochman estimates that Triple Dolls accounts for about 40% of the chain’s sales growth.
But the popularity of “Big Dipper” and “Big Crusher” has brought new problems to Chili’s. Its restaurants must be ready for an influx of customers, many of whom are trying Chili’s for the first time or returning after a long absence. Hodgman said Chili’s has been investing in its workforce over the past two years — from hiring servers to adding cooks — but those moves have put pressure on profits this season.
Hockman said Chili’s transformation isn’t just affecting employees.
Under his leadership, the company has struggled to increase sales and become profitable over the past two years. Chili’s has streamlined its menu, cutting about 22% of its dishes.
Brinker also ended some of its less profitable strategies to attract customers. Chili’s no longer offers as many coupons as it once did, and Brinker discontinued the Maggiano’s Italian Classics virtual brand.
Meanwhile, Chili’s is also getting ahead of its rivals, who are now launching their own deals. But Hodgman is confident Chili’s can maintain its lead and the new customers TikTok and TV ads are bringing.
“For nearly 18 months, we’ve been promoting our values, but a lot of people are late to the party, and sometimes it’s the more radical values, and they just don’t have the awareness that we have because we’ve been there,” he said.
But as Brink’s enters a new fiscal year, retaining new customers may be difficult. From McDonald’s to Outback Steakhouse, many restaurants are offering value meals aimed at attracting diners looking for a discount. Customers can continually reduce the number of restaurant visits to save money. Over the past 12 months, the price of food away from home has increased by 4.1%, but has remained relatively sticky.
Brinker expects earnings per share for fiscal 2025, which begins in July, of $4.35 to $4.75, with revenue growing 3% to 4.6%. Given Chili’s recent success, investors expect stronger growth prospects. But Brinker is proceeding cautiously in case the economy takes a turn for the worse.
“It’s important for our team to set goals that we believe are achievable,” Hochman said.
“(The economy) has certainly gotten worse over the past three to four months,” he added.
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