Thanks to an ad campaign targeting fast-food chains and a TikTok-worthy appetizer, Chiliz’s same-store sales rose nearly 15% in its most recent quarter.
However, Kevin Hochman, CEO of the parent company, Brinker Internationaltold CNBC that the chain’s strong performance is just a sign that customers are finally starting to notice the chain’s two-year turnaround.
Brinker shares have risen 53% this year, giving it a market capitalization of $2.99 ​​billion, but closed down 10.7% on Wednesday after the company’s weaker-than-expected profit and earnings disappointed analysts. The company gave a conservative outlook for fiscal 2025.
The stock was up 7% in afternoon trading Thursday, rebounding from what BMO Capital Markets called an investor “overreaction.” KeyBanc Capital Markets also boosted the stock on Thursday, saying the company’s quarterly results were misinterpreted.
Forecasts aside, Chiliz even made its 8.6% same-store sales growth projection from street accounts seem cautious. The company’s 14.8% same-store sales growth rate puts it in rarefied territory. chipotle pepper and Wingstop At a time when many consumers are cutting back on spending, a handful of publicly traded restaurants have reported strong traffic and same-store sales growth, putting pressure on the industry. Chilean casual-dining rival Applebee’s Inc. Dyne Brandand Bloomin’ Brands Outback Steakhouse reported a decline in same-store sales in its latest quarter.
“This is really the next big change in the industry,” Hochman said. “I think the possibilities for this brand are endless.”
Mr. Hochman said about 60% of Chiliz’s sales growth in the most recent quarter came from the $10.99 Big Smasher set, a deal the chain promoted in TV ads aimed at fast-food rivals.
“We leveraged an insight we had seen on social media a few months ago that customers were unhappy with what was happening to fast food prices,” Hochman said. “The ad clearly struck a chord with people in that regard.”
Another hit menu item at Chili’s this quarter has been the “Triple Dipper,” which allows customers to choose three entrees and dips and 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 the Triple Dipper and Big Smasher has created a new problem for Chili’s: Its restaurants must prepare to handle an influx of customers, some new to Chili’s and some returning after a long absence. Hochman said Chili’s has invested in labor over the past two years, from hiring more servers to adding cooks, but those measures hurt profits this quarter.
Chile’s recovery won’t just affect employees, Hochman said.
Under his leadership, the company has worked to grow sales while improving profits over the past two years, streamlining its menu and cutting about 22% of items.
Brinker has also abandoned some of its lower-margin strategies to attract customers: Chili’s doesn’t offer as many coupons as it used to, and Brinker has discontinued its virtual brand, Maggiano’s Italian Classics.
At the same time, Chiliz is working to stay ahead of its competitors up the value chain, who are also rolling out their own deals, but Hochman is confident Chiliz can maintain its lead and capture new customers brought to it by TikTok and TV ads.
“We’ve been promoting our values ​​for almost 18 months now, but there are a lot of late entrants, some with more aggressive values ​​at times, who don’t have the same recognition that we do, even though we’ve been working on it for a long time,” he said.
But retaining new customers may be a challenge as Brinker heads into a new fiscal year. Numerous restaurants, from McDonald’s to Outback Steakhouse, have rolled out value menus designed to appeal to discount-hungry customers. And customers may continue to cut back on restaurant visits to save money. Prices for dining out, which rose 4.1% over the past 12 months, have remained relatively steady.
For fiscal 2025, which began in July, Brinker sees earnings per share of $4.35 to $4.75 and sales growth of 3% to 4.6%. Investors had been hoping for stronger growth prospects given Chile’s recent success, but Brinker is playing it safe in case the economy worsens.
“It’s important for our team to set goals that we feel are achievable,” Hochman said.
“[The economy] “The situation has definitely worsened in the last three to four months,” he added.
