Chili's Traffic Stalls in 1Q. But Are Better Days Ahead?
Chili’s traffic fell nearly 9 percent during the first quarter of its fiscal 2018, which the brand attributed primarily to hurricanes Irma and Harvey. The traffic decline coincided with a 3.4 percent drop in same-store sales, compared to a 1.4 percent comparable sales decrease and a 4.1 percent traffic decline during the same quarter last year.
Investors remain optimistic with the brand; however, as shares climbed more than 6 percent early Wednesday boosted by optimism for the new menu. Chili’s cut its menu by 40 percent beginning in September to reduce operational complexity and focus on core menu items like burger, ribs, and fajitas.
“We have seen our traffic trends turn and we’re going to use that momentum to continue to focus on building traffic at Chili’s,” Brinker CEO Wyman Roberts said in a conference call Wednesday, though he declined to provide investors specific details to what extent traffic may be turning around.
Roberts said during the call that tickets taking longer than 15 minutes have dropped by 40 percent since the new menu launch, and guests experiencing a faster experience and meals at a better value are more likely to return. Chili’s is also beginning a re imaging program at restaurants to boost the guest experience.
While the casual dining brand cut 50 menu items for the menu relaunch, executives say that the impact that has had on customers who desire those items has been minimal. “When guests come in and they want an item we don’t have anymore, operators are doing a great job of directing them to other items, like our new burger,” Roberts said.
At Maggiano’s, same-store sales fell by 2.6 percent and traffic fell by 2.8 percent, compared to declines of 0.6 percent and 1.6 percent a year ago, respectively.
Chili’s opened 13 franchise and one company owned location during the quarter, while Maggiano’s opened one location. Brinker plans to open up to 57 franchised and company owned Chili’s in fiscal 2018, which will bring the total number of restaurants to nearly 1,690 locations internationally. Maggiano’s will open one location in in fiscal 2018, bringing the total unit count to 53.
Net income at Brinker fell from $23.2 million during the same quarter last year to nearly $9.9 million this quarter.