Chili’s keeps rolling, with a kick from chicken sandwiches

Chili’s Grill and Bar continues to one-up itself.

Same-store sales at the casual-dining chain rose 4% year over year in the quarter ended March 25, building upon 31% growth from the prior year. That equates to two-year cumulative growth of 37%. It was Chili’s 20th straight quarter of positive same-store sales.

Customers continue to flock to the chain for its $10.99 combo meals and Triple Dipper appetizers, and they are having a better experience when they do. Nearly 80% of customers who visited Chili’s last quarter said they planned to return, an all-time high, the company said Wednesday.

Sales growth drivers

It marks the latest chapter in an impressive comeback at the 1,210-unit chain that has been driven by ongoing improvements to food and service backed by value-focused marketing. The strategy has re-established Chili’s as a force in casual dining and beyond.

The chain’s numbers for the most recent quarter would have been even better had it not been for Winter Storm Fern, which dropped snow and ice over a large section of the country in late January. Same-store sales rose just 0.6% that month, but rebounded in February and March, with 5.9% growth driven by positive traffic.

Overall for the quarter, traffic fell 1.2% year over year, while prices were 4.6% higher and mix was up 0.6%. Executives estimated that the storm had a 2.1% negative impact on sales and traffic.

Chili’s still outpaced the casual-dining industry by 420 basis points in the period, executives said during an earnings call Wednesday.

And it has widened that gap in the current period. So far this month, Chili’s same-store sales are up in the mid-single digits on positive traffic, a trend the company expects to sustain through the end of the quarter.

New menu impact

The launch of new chicken sandwiches on April 14 is playing a role in that. The Big Crispy comes in six flavors and features a large chicken breast that is hand-breaded in-stores. Two weeks in, Chili's is selling 161% more chicken sandwiches than it was before, outpacing sales in test locations. And early feedback has been positive.

“The first thing that people tend to say when they see it is, ‘Oh my goodness, this is a really big sandwich,’ which is exactly what we're going for,” CEO Kevin Hochman said.

Chili’s has marketed the Big Crispy as a bigger and better alternative to fast-food chicken sandwiches, with ads that show the Big Crispy tipping a literal scale in Chili’s favor. The sandwich is part of the chain’s 3 for Me value menu, which offers an entree, bottomless chips and salsa, fries and a soft drink starting at $10.99.

The chain has seen signs of the difficult macroeconomy trickling into its business. Though traffic is accelerating, some customers are cutting back on dessert or alcohol, for instance.

“Overall sales are still way up … but we are seeing some incidents start to slow,” Hochman said.

Value focus and outlook

With that in mind, the chain is staying focused on what it can control. In particular, it’s continuing to improve on the fundamentals of food and service while also appealing to customers’ demand for value. CFO Mika Ware noted that the chain plans to keep price hikes to a minimum in the near-term.

“We're always going to make sure that we can price for inflation, but we're going to make sure we balance that with making sure value is there for our guests,” she said.

On the food front, Chili’s has recently made investments in its ribs, frozen margaritas, queso, nachos and bacon cheeseburger and will continue to focus on its core categories of burgers, Chicken Crispers, margaritas and fajitas.

And on service, Chili’s is looking at ways to speed up table turns. Its best-performing stores—those generating more than $6 million in annual revenue—serve 20% to 80% more customers than average. The company is studying these “North of 6” locations to find out what tactics it can apply systemwide, where AUVs are approaching $5 million.

It’s also gradually improving its restaurants, with four renovations complete and another eight to 10 planned for this fiscal year, which ends in June. It will then tackle 60 to 80 stores next fiscal year and expects to do 10% of the system each year after that, with plans to return to new-unit growth in fiscal 2029.

Chili’s sister concept under Brinker International, the 51-unit Maggiano’s, did not have such a great quarter. Same-store sales declined 4.6%, and restaurant-level margins sunk by nearly 5 points, to 9.6%.

But executives said its turnaround plan, dubbed Back to Maggiano’s, is starting to bear fruit. Traffic and sales improved in each month of the quarter, and customers are responding well to new, larger portions and the return of some classic dishes such as eggplant parm.

“We still have a lot more opportunity ahead of us with service and removing non-value-added processes to improve Maggiano’s dining times, but the important thing to know is we are making sequential progress,” Hochman said.

Overall for the quarter, Brinker reported total revenue of $1.47 billion, a 3.2% increase compared to last year. Restaurant operating margins were 18.4%, down from 18.9%, due to higher commodity costs and restaurant expenses. Net income increased more than 7%, to $127.9 million.

The company also updated some of its financial guidance for the remainder of the fiscal year. It’s now expecting total revenues of $5.78 billion to $5.82 billion, narrowed slightly from $5.76 billion to $5.83 billion previously.