- Chili's sales surged nearly 15% last quarter, outpacing competitors like Applebees and Olive Garden.
- Chili's success is attributed to increased menu pricing, higher traffic, and new value advertising.
Casual dining and fast-food earnings have failed to impress Wall Street this quarter, but one casual restaurant chain is having a moment.
Chili's sales grew by nearly 15% this quarter compared to last year, parent company Brinker said in an earnings report on Wednesday. This number is a big contrast from peers like Applebees, which saw a nearly 2% decline in same-restaurant sales, and Olive Garden, where same-store sales fell 1.5% this quarter.
Both of Chili's rivals kept prices stable by offering value deals or by avoiding price hikes.
"The comparable restaurant sales increase at Chili's was primarily due to increased menu pricing and higher traffic," including new customers, Brinker said in its fourth-quarter earnings release.
The company also attributed success to value advertising and the launch of the "Big Smasher" burger, which many view as a direct competitor to McDonald's signature — the Big Mac.
Brinker posted a revenue of $1.21 billion, a 12.3% rise year-on-year, and profit rose by $3.1 million compared to last year.
The company's stock was down almost 11% at closing but pared losses in after-hours trading.
"We think strong demand trends in July/early Aug reflect success in improving the guest experience & could lead to longer-term frequency benefits," Jefferies analysts wrote in a note on Wednesday. They raised their same-store sales target to 8.5%.
Chili's standout performance comes as other fast food and casual dining chains post rocky earnings reports.
The CEO of Applebees parent Dine Brands noted that its restaurants were suffering from a reluctance to spend due to inflation.
"It looks to me like there's a lag from when inflation actually occurs and when it begins to affect the behavior of the consumer," CEO John Peyton, said in an earnings call earlier this month.
The CEO of Darden Restaurants, which runs Olive Garden and LongHorn Steakhouse, echoed the sentiments on Darden's earnings call. He said that customers are concerned about inflation and are getting increasingly anxious about the job market.
Fast food giant McDonalds, which serves food cheaper than casual restaurants, also acknowledged the company's relatively weak performance last quarter and said that sales were hurt because it increased prices.
In an earnings call last month, McDonald's Chief Chris Kempczinski said McDonald's raised prices in recent years in response to high inflation, which "disrupted long-running value programs and led consumers to reconsider their buying habits.