Chili's caught in 'toughest quarter' for casual dining

by Monica Watrous
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Chilis  
Comparable sales declined 1.4 percent at Chili's company-owned restaurants and 0.6 percent at Chili's franchise restaurants. 
 

DALLAS — The recent quarter was the “toughest quarter casual dining has seen in five years,” according to the top executive of Brinker International, Inc., parent company of Chili’s Grill & Bar and Maggiano’s Little Italy.

Wyman
Wyman Roberts, CEO and president of Brinker International 

“We started off strong, we had positive comps, we were taking share, we had a new value platform and momentum on our side, and then August hit, and sales got real challenging,” said Wyman Roberts, CEO and president, during an Oct. 25 earnings call with financial analysts. “Not just for us, but for the industry.”

Net income in the first quarter ended Sept. 28 was $23,233,000, equal to 42 cents per share on the common stock, down from $33,207,000, or 55 cents per share, in the prior-year period. Total revenues declined to $758,492,000 from $762,559,000 the year before.

Comparable sales declined 1.4 percent at Chili’s company-owned restaurants and 0.6 percent at Chili’s franchise restaurants. Maggiano’s Little Italy comparable restaurant sales fell 0.6 percent in the quarter.

“We continue to see sequential improvement, and we are back to performing better than the category,” Roberts said of the Chili’s brand. “So we feel good about how the initiatives have set us up for growth and the balance of the fiscal year and beyond.”

 Chilis
Chili's recently introduced grass-fed burgers in an effort to improve performance. 
 

The introductions of craft beer and grass-fed burgers are among initiatives under way to improve performance at Chili’s. During the quarter, the chain doubled the number of beer taps in half of its restaurants and began offering local craft beers.

The recent launch of grass-fed burgers “really was our first adventure into being more overt about transparency of product and bringing in a grass-fed, antibiotic/hormone-free alternative patty,” Roberts said.

“We learned quite a bit from it, and we are excited about modifying how we bring that to our guests,” he said. “We’ve already changed how we market it and merchandise in the restaurant, and it’s significantly increased the number of guests that are now eating it this quarter versus last quarter. So we’re continuing to evolve that aspect of the business.

“It’s going to be a journey with regard to understanding what consumer’s expectations are around transparency and how we can fulfill those needs and still be true to the brand. And so, we were happy with our first marketing effort around that and we’re going to continue to learn and get smarter about how to do that.”

Chilis  
During the quarter, Chili's doubled the number of beer taps in half of its restaurants and began offering local craft beers. 
 

Chili’s also has expanded its 3 For Me value menu with more options, such as fajitas with a salad and dessert for $10. The company will continue to keep its value offering “fresh and relevant,” Roberts said.

“Just as we said last quarter, these continue to be challenging times across casual dining,” Roberts said. “We’re already seeing some of the weaker players struggle with their viability in this choppy environment. My belief is that at the end of the day, strong brands that are run well will succeed. We have strong brands, run by smart leaders and great operators. We have the right game plan, designed to weather the storm and come out stronger on the other side.

“We’ll continue to stay true to our strategies to invest in driving top-line growth, keeping the business model intact and keeping our financials strong.”

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