Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chili's delivered a 14% sales growth with a 6.5% increase in traffic, indicating strong consumer demand.
- Brinker International Inc (EAT, Financial) reported a year-over-year restaurant operating margin improvement of 310 basis points.
- The company's marketing strategies, including the Big Smasher campaign and social media initiatives, have been effective in driving traffic and sales.
- The introduction of new menu items like the Nashville Hot Mozz Sticks and the expansion of the Triple Dipper have been successful, with the Triple Dipper now representing 11% of the business.
- Brinker International Inc (EAT) raised its fiscal 2025 full-year guidance, reflecting confidence in continued growth and profitability.
Negative Points
- Maggiano's reported a negative 8.7% traffic, indicating challenges in attracting customers despite other positive metrics.
- The company is experiencing normal challenges associated with the transition to a new Oracle ERP system, which could impact operations if not managed carefully.
- Despite strong sales growth, the mix of the 3 for Me offering only increased by 1%, suggesting limited upsell success.
- The removal of the $6 take-home pasta offerings at Maggiano's is expected to result in a 1% drag on top-line sales and traffic.
- Advertising costs are expected to increase in the coming quarters, which could impact margins if not offset by sales growth.
Q & A Highlights
Q: How are you thinking about the restaurant level margin for the year with the strong same-store sales performance through Q1?
A: Michaela Ware, CFO, stated that they expect to continue driving restaurant level margins, projecting a 100 basis points or more favorable year-over-year improvement.
Q: Can you provide more color on how you plan to use insights from tokenized data to continue traffic and sales momentum?
A: Kevin Hochman, CEO, explained that tokenized data helps understand the performance of initiatives like the Big Smasher campaign and social media efforts. It allows them to track guest behavior, such as frequency of visits, and provides confidence in their strategy to improve casual dining fundamentals.
Q: How are you managing menu pricing at Chili's, especially with the growth of the 3 for Me platform?
A: Kevin Hochman noted that they are managing merchandising to ensure mix doesn't negatively impact margins. Despite traffic success, the 3 for Me mix only increased by a point, with many guests choosing higher-priced tiers, which is accretive to check.
Q: What are your thoughts on unit growth and capital strategies beyond this year?
A: Kevin Hochman mentioned no change in the current approach to net new units. They are considering capital allocation discussions internally, including accelerating new builds, reimaging older assets, and exploring white space markets for both brands.
Q: Can you discuss the strategy at Maggiano's, particularly regarding pricing and traffic?
A: Kevin Hochman explained that Maggiano's is in a similar phase to Chili's turnaround, focusing on reducing discounting and improving fundamentals. They expect traffic improvements as investments in food quality, service, and atmosphere take hold.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
