An ad campaign targeting fast-food chains and a TikTok-viral appetizer helped Chili’s same-store sales climb nearly 15% in the last quarter.
But Kevin Hochman, CEO of the parent company Brinker Internationaltold CNBC that the chain’s strong performance is just a sign that customers are finally catching on to the chain’s two-year turnaround.
Brinker’s shares have risen 53% this year, raising its market value to $2.99 billion. However, the stock closed 10.7% lower on Wednesday after the company disappointed analysts with lower-than-expected earnings and a conservative outlook for fiscal 2025;
Shares rose 7% in afternoon trading Thursday, recovering from what BMO Capital Markets called an “overreaction” by investors. KeyBanc Capital Markets also upgraded the stock on Thursday, saying its quarterly results were a miss.
Beyond forecasts, Chili’s made even StreetAccount’s same-store sales estimates of 8.6% growth look cautious. Its same-store sales growth of 14.8% places it in rare company, joining Chipotle and Wingstop as the few public restaurants report strong footfall and same-store sales growth at a time when many consumers are pulling back on spending, putting pressure on the industry. Chili’s competitors, such as Applebee’s, belong in casual dining Dine Brandsand Bloomin’ Brands’ Outback Steakhouse reported a decline in same-store sales for the past few quarters.
“This is just a whole change in the business,” Hochman said. “I think the sky’s the limit for this brand.”
About 60 percent of Chili’s growth last quarter came from the $10.99 Big Smasher meal, according to Hochman. The chain promoted the deal by targeting fast-food competitors in television ads.
“We had leveraged this knowledge that we were seeing on social media months before, that customers were upset about where fast food prices were going,” Hochman said. “The ad clearly struck a nerve with it.”
Another successful menu item for Chili’s this quarter was the Triple Dipper, which allows customers to choose three appetizers and dips. The clip went viral on TikTok in May. Hochman estimates that the Triple Dipper accounted for about 40% of the chain’s sales growth.
But the popularity of both the Triple Dipper and the Big Smasher created new problems for Chili’s. Its restaurants must be prepared to handle the influx of customers, many of whom were trying Chili’s for the first time or returning after a long time away. Hochman said Chili’s has invested in the workforce over the past two years — from hiring buses to adding more cooks — but those steps weighed on the bottom line this quarter.
Chili’s recovery has touched more than just its workforce, according to Hochman.
Under his leadership, the company spent the last two years trying to increase sales profitably. Chili’s has gutted its menu, eliminating about 22% of items.
Brinker has also ended some less profitable strategies to attract customers. Chili’s doesn’t offer as many coupons as it once did, and Brinker pulled the plug on the iconic Maggiano’s Italian Classics brand.
At the same time, Chili’s has also leaned on value ahead of the competition, who are now rolling out their own offerings. But Hochman is confident Chili’s can maintain its lead — and the new customers that TikTok and TV ads have brought.
“We’ve been advertising our value for almost 18 months, and a lot of people are coming late to the game, and sometimes it’s more aggressive value, and they just don’t have the awareness that we have, because we’ve been doing it for a while,” he said.
But as Brinker heads into a new fiscal year, retaining her new customers may prove difficult. A host of restaurants, from McDonald’s to Outback Steakhouse, have unveiled value meals designed to attract discount-seeking diners. And customers could continue to limit their restaurant visits to save money. Prices of food away from home, which rose by 4.1% over the past 12 months, remained relatively stable.
For Brinker’s 2025 fiscal year, which began in July, the company expects earnings per share of $4.35 to $4.75 and revenue growth of 3% to 4.6%. Investors expected stronger growth prospects given Chili’s recent success. But Brinker is playing it safe in case the economy turns sour.
“It’s important for our team to set goals that we believe are achievable,” Hochman said.
“[The economy] it has definitely taken a turn for the worse in the last three to four months,” he added.
