An ad campaign targeting fast-food chains and a TikTok-viral appetizer helped Chili\u2019s same-store sales climb nearly 15% in its latest quarter.<\/p>\n
But Kevin Hochman, CEO of parent company Brinker International, told CNBC that the chain\u2019s strong performance is just a sign that customers are finally catching onto the chain\u2019s two-year turnaround.<\/p>\n
Shares of Brinker have climbed 53% this year, bringing its market value up to $2.99 billion. However, the stock closed 10.7% lower Wednesday after the company disappointed analysts with weaker-than-expected earnings and <\/strong>a conservative outlook for its fiscal 2025.<\/p>\n Shares were up 7% in afternoon trading on Thursday, rebounding from what BMO Capital Markets called an \u201coverreaction\u201d from investors. KeyBanc Capital Markets also upgraded the stock on Thursday, saying that its quarterly results were misunderstood.<\/p>\n Forecast aside, Chili\u2019s made even StreetAccount\u2019s same-store sales estimates of 8.6% growth look cautious. Its 14.8% same-store sales growth puts it in rare company, joining Chipotle and Wingstop as the few public restaurants reporting strong traffic and same-store sales growth at a time when many consumers are pulling back their spending, putting pressure on the industry. Chili\u2019s casual-dining rivals like Applebee\u2019s, owned by Dine Brands, and Bloomin\u2019 Brands\u2019 Outback Steakhouse, reported same-store sales declines for their latest quarters.<\/p>\n \u201cThis is just a whole \u2019nother step change in the business,\u201d Hochman said. \u201cI think sky\u2019s the limit for this brand.\u201d<\/p>\n About 60% of Chili\u2019s growth in its latest quarter came from its $10.99 Big Smasher meal, according to Hochman. The chain promoted the deal by taking aim at fast-food rivals in TV ads.<\/p>\n \u201cWe had tapped into this insight that we were seeing in social media months prior, that customers were upset about where fast-food prices were going,\u201d Hochman said. \u201cThe advertising clearly touched a nerve on that.\u201d<\/p>\n Another successful menu item for Chili\u2019s this quarter was its Triple Dipper, which lets diners select three appetizers and dips. The item went viral on TikTok in May. Hochman estimates that the Triple Dipper accounted for about 40% of the chain\u2019s sales growth.<\/p>\n But the popularity of both the Triple Dipper and the Big Smasher created new problems for Chili\u2019s. Its restaurants have to be prepared to serve the influx of customers, many of whom were trying Chili\u2019s for the first time or returning after a long time away. Hochman said Chili\u2019s has been investing in labor for the last two years \u2014 from hiring bussers to adding more cooks \u2014 but those steps pressured its bottom line this quarter.<\/p>\n Chili\u2019s turnaround has touched more than just its workforce, according to Hochman.<\/p>\n Under his leadership, the company has spent the last two years trying to grow sales profitably. Chili\u2019s has culled its menu, shedding about 22% of items.<\/p>\n Brinker has also ended some less profitable strategies to attract customers. Chili\u2019s doesn\u2019t offer as many coupons as it once did, and Brinker pulled the plug on its Maggiano\u2019s Italian Classics virtual brand.<\/p>\n At the same time, Chili\u2019s also leaned into value ahead of the competition, who are now rolling out their own deals. But Hochman is confident that Chili\u2019s can hold onto its lead \u2014 and the new customers that TikTok and TV ads have brought.<\/p>\n \u201cWe\u2019ve been advertising our value for almost 18 months, and a lot of folks are coming late to the game, and sometimes it\u2019s more aggressive value, and they just don\u2019t have the awareness that we have, because we\u2019ve been at it a while,\u201d he said.<\/p>\n But as Brinker heads into a new fiscal year, holding onto its new customers could prove to be difficult. A plethora of restaurants, from McDonald\u2019s to Outback Steakhouse, have unveiled value meals meant to appeal to diners seeking discounts. And customers could keep cutting back their restaurant visits to save money. Prices for food away from home, which have risen 4.1% over the last 12 months, have stayed relatively sticky.<\/p>\n For Brinker\u2019s fiscal 2025, which kicked off in July, the company is anticipating earnings per share of $4.35 to $4.75 and revenue growth of 3% to 4.6%. Investors were expecting a stronger outlook for growth, given Chili\u2019s recent success. But Brinker is playing it safe in case the economy worsens.<\/p>\n \u201cIt\u2019s important for our team to set goals that we think are achievable,\u201d Hochman said.<\/p>\n \u2033[The economy] certainly has taken a turn for the worse in the past three to four months,\u201d he added.<\/p>\n<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" An ad campaign targeting fast-food chains and a TikTok-viral appetizer helped Chili\u2019s same-store sales climb nearly 15% in its latest quarter. But Kevin Hochman, CEO of parent company Brinker International, told CNBC that the chain\u2019s strong performance is just a sign that customers are finally catching onto the chain\u2019s two-year turnaround. 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