Filed under: Company News, Earnings, Market News, Restaurants, Investing
There are some signs of life in casual dining. Chili’s Grill & Bar parent Brinker International (EAT) posted encouraging fiscal first-quarter results on Tuesday morning. Revenue increased 4 percent to $711 million, just ahead of the $709.2 million that analysts were expecting. Net income excluding special items rose to 50 cents a share from 43 cents a share a year earlier, in line with Wall Street’s profit target.
Brinker was able to post modest sales growth and widening margins in a climate that’s challenged many casual-dining rivals. The most exciting aspect of Brinker’s report is that the growth didn’t really come from expansion efforts, though there are more Chili’s and Maggiano’s Little Italy locations out there than there were a year ago. Growth at individual eateries is driving results. Comparable-restaurant sales at company-owned Chili’s locations increased 2.6 percent as a slight uptick in traffic and customers spending more helped push store-level performance higher.
Sizzling Like Fajitas
This isn’t a fluke. Chili’s posted a 0.6 percent increase in comps at company-owned locations in its fiscal year that ended in June. That followed a 0.5 percent uptick in fiscal 2013. That may not seem like heady growth — not even keeping pace with inflation — but it came at a time when many rivals were getting pounded.
However, fiscal 2015’s first quarter is even more impressive because customer counts inched higher. The eatery-level sales gains in the two previous years were the result of price increases and product mix, but store traffic declined 1.8 percent in each year.
Customers are coming back this time, and technology could be playing a starring role. Earlier this year, Chili’s began installing tabletop tablets that customers can use to request drink refills, place appetizer and dessert orders, or settle up their tabs at the end of the meal. A waitstaff is there to take the initial order and available for those who prefer to cash out or request refills the old-fashioned way, but the tablets appear to be living up to the hype.
High-Tech on the Menu
Chili’s, DineEquity’s (DIN) Applebee’s and Pizzeria Uno turned heads late last year by being among the first major casual-dining chains to announce plans to implement tableside tablets in 2014.
There were many selling points in the move. Patrons could play games on the tablets while they wait for the food, making the time spent more enjoyable. More important, the companies behind the tablets offered up case studies in which customers spent more when given visual displays of menu items. They also spent less time at the restaurant since they didn’t have to flag down a waiter or waitress to place orders or pay at the end of the meal. That last point is a win-win, since customers save time, and the establishments can turn the table over faster.
It’s still too soon to tell if technology is giving Chili’s an advantage, but we’ll have a clearer indication when DineEquity reports next week.
For now, Brinker is doing more than a few things right. You’re not necessarily seeing that at most of the other mass-market table-service establishments. Darden Restaurants (DRI) has been a disaster, recently unloading its Red Lobster chain to focus on Olive Garden. Things haven’t gone well at Olive Garden, with five consecutive quarters of negative comps.
If comparing Olive Garden to Chili’s doesn’t seem fair given the different concepts, consider that Brinker’s casual Italian chain — Maggiano’s Little Italy — has come through 19 straight quarters of year-over-year upticks in comparable-restaurant sales.
Motley Fool analyst Rick Munarriz has no position in any stocks mentioned. He still sings the old “baby back ribs” Chili’s jingle, even if no one is around to hear it. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days.
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Source: Investing
