Chili’s same-store sales have surged nearly 15% in its latest quarter, thanks to an ad campaign targeting fast-food chains and a TikTok-viral appetizer. The CEO of parent company Brinker International, Kevin Hochman, attributes this strong performance to the chain’s two-year turnaround. Despite the success, Brinker’s stock closed 10.7% lower after disappointing analysts with weaker-than-expected earnings and a conservative outlook for its fiscal 2025.
About 60% of Chili’s growth in its latest quarter came from its $10.99 Big Smasher meal. The chain’s TV ads took a direct shot at fast-food rivals, capitalizing on consumer dissatisfaction with rising fast-food prices. Another popular menu item was the Triple Dipper, which allows diners to choose three appetizers and dips. This item went viral on TikTok in May and contributed significantly to Chili’s sales growth.
The success of the Big Smasher and the Triple Dipper created operational challenges for Chili’s. The influx of customers, many trying the chain for the first time or returning after a long absence, strained the existing workforce. Chili’s has been investing in labor for the past two years, from hiring bussers to adding more cooks, but these measures impacted its bottom line in the latest quarter.
Under Hochman’s leadership, Chili’s has focused on growing sales profitably by streamlining its menu and eliminating less profitable strategies. About 22% of items have been removed from the menu, and certain customer-attracting tactics have been discontinued. While Chili’s has reduced the number of coupons offered, it has emphasized value to stay ahead of the competition.
As Brinker International enters a new fiscal year, maintaining the momentum gained from TikTok and TV advertising may prove challenging. Competitors like McDonald’s and Outback Steakhouse have introduced value meals to attract price-conscious consumers. Furthermore, with food prices away from home rising by 4.1% over the last 12 months, customers may continue to cut back on restaurant visits to save money.
For fiscal 2025, Brinker anticipates earnings per share of $4.35 to $4.75 and revenue growth of 3% to 4.6%. While investors were expecting a stronger growth outlook given Chili’s recent success, Brinker is taking a cautious approach due to economic uncertainties. Hochman emphasized the importance of setting achievable goals, especially in a challenging economic environment.
While Chili’s has demonstrated remarkable sales growth and customer acquisition through strategic menu offerings and targeted advertising, the chain faces tough competition and economic headwinds moving forward. Brinker International must continue to innovate and adapt to changing consumer preferences to sustain its success in the casual dining market.