Consumer-oriented initiatives at Chili’s Grill & Bar, the flagship brand of Brinker International Inc., continued to drive sales and traffic at the casual-dining chain, Brinker executives said Thursday.
Although same-store sales increased in the fourth quarter ended June 29, Brinker reported that profit fell 34 percent, with the prior-year period benefiting from an additional operating week. Brinker also owns the Maggiano’s Little Italy brand.
Brinker said it earned $41.9 million, or 49 cents per share, compared with $63.6 million, or 62 cents per share, a year earlier. With exclusions for tax adjustments and special items, earnings from continuing operations rose to 48 cents from 44 cents. Revenue was off 3.4 percent, to $717.5 million, with a 7.5-percent decrease because of the prior year’s additional week.
Same-store sales at company units were up 2.6 percent for both concepts, with Maggiano’s seeing a 5.7-percent hike and Chili’s logging a 2.1-percent increase.
Doug Brooks, president and chief executive of Brinker, said in a conference call with analysts that the company continued to work on margins in the fourth quarter and, “our sales-building initiatives gained more traction and continue to generate positive growth in both sales and traffic.” He added that Chili’s showed positive same-store sales in February and March, as well as in each of the three months of the fourth quarter.
Given the uncertain economy, Brooks said value strategies, such as Chili’s $20 Dinner for Two menu and new Lunch Combos, and Maggiano’s Classic Pasta, have become increasingly important to guests.
Wyman Roberts, president of the Chili’s division, said that brand’s combos, launched in the third quarter, have boosted lunch business throughout the week. It features sandwiches paired with soup or salad and served with fries.
“Lunch traffic, which was negative before we launched the combos, has shown sustained positive trends since the roll-out,” Roberts said. “We’re maintaining our margins, as these new Lunch Combos were created with food costs in line with our overall menu.”
Chili’s has 1,534 units, with 824 company-owned, 475 franchised and 235 international.
At the 44-unit Maggiano’s, Brooks said guest counts increased 5.8 percent in the fourth quarter. He cited the value proposition in the Classic Pasta category.
“Guests buy one entree and go home with a second full entree compliments of our chef,” Brooks said.
Other highlights from Brinker’s analyst call:
• New Maggiano’s on horizon: The 44-unit division has not added stores in several years, but Brooks anticipates new restaurant growth as early as fiscal year 2013.
• Maggiano’s banquets and delivery: Sales in this segment grew 25 percent in fiscal year 2011.
• International development: With same-store sales across all overseas Chili’s and Maggiano’s units growing 7.5 percent in the quarter and 3.5 percent for year, Brooks said the company remains committed to expanding globally. However, development may be slower than the 425-unit goal by 2015. Chili’s opened 23 net new international restaurants in 2011. The first Chili’s in Brazil is expected to open in the first quarter of 2012.
• Alternative marketing: Roberts said Chili’s is connecting with guests through email and social media, growing its email database fourfold over the past 12 months. Facebook, where Chili’s recently passed its one-million-fan mark, and Twitter, “show potential,” he said.
• Chili’s re-imaging: “Last quarter, we completed our lab market in Oklahoma City, and we learned a lot from our guests,” Roberts said. “Our expectation is to have about 250 re-imaged restaurants by the end of [fiscal] ’12.”
• Chili’s kitchen retrofits: The second phase of new kitchen retrofits, which the company said reduced prep labor costs and increased ticket times, will be expanded to about 500 Chili’s restaurants. About 15 were completed in the fourth quarter in the Dallas market; the program now moves to Tampa, Fla.
• Bar programs: Chili’s plans to beef up its beverage program in this fiscal year, Roberts said. “We are placing specific emphasis on our bars this year, which we are confident will further strengthen our business model, given the favorable margins associated with alcohol sales,” he said.
• Credit facility: Guy Constant, Brinker’s chief financial officer, said the company just executed a new credit facility, “to increase our total capacity to $500 million to take advantage of favorable pricing relative to our current facility.” He said that increases Brinker’s financial flexibility and, “the five-year term further extended its maturity beyond our 5.75-percent note.”
• Food costs: Constant said Brinker expects commodity inflation to be in the low 4 percent area. “Given what’s happening with the markets, you would hope that would at least dampen the inflationary pressures. If we are lucky, we maybe we would get a little deflation from that,” he said.