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Chili's debuts $20-dinner-for-two offer

Chili's debuts $20-dinner-for-two offer

Brinker looks to rebuild traffic at flagship after soft 4Q sales

Chili’s Grill & Bar introduced this week a $20 dinner-for-two promotion to help boost customer traffic after a fourth quarter that included a same-store sales decline at the flagship brand of Brinker International Inc.

In two separate promotions last year, Chili’s had offered a “Three for $20” deal with a shared appetizer, two entrees and a shared dessert. This year’s version pares off the dessert.

Brinker, the Dallas-based casual-dining company, reported a 51-percent increase in net income for the June 30-ended quarter, to $63.6 million, or 62 cents a share, up from $42.1 million, or 41 cents a share, in the same quarter last year. The latest quarter included a $16.5 million gain from Brinker's sale of the On The Border concept to an affiliate of Golden Gate Capital.

Fourth-quarter revenue rose slightly, to $743.1 million from $742.1 million in the same quarter a year ago.

Chili’s same-store sales in the fourth quarter fell 4.1 percent, compared with a 9.4-percent decline in last year's fourth quarter. Maggiano’s same-store sales rose 1.3 percent in the quarter, versus a 9.2-percent drop in the year-ago quarter. Blended same-store sales declined 3.4 in the fourth quarter, after falling 9.4 percent last year.

“Consumer sentiment still remains tough and people are still looking for a deal,” Wyman Roberts, president of Brinker’s Chili’s division, said in an investor conference call Thursday, adding that the $20 dinner for two offer is in stores now after being introduced first to the chain’s e-mail club.

“We’ve taken the learnings from the past year and incorporated them into making this offer compelling to the guest and [a] win for Chili’s margins," he said.

“The absence of dessert and improved distribution of entrée selections over multiple stations in the kitchen will alleviate the pressures felt on labor,” Roberts said, adding that the expected break-even traffic for this offer would be an improvement over similar programs last year.

Brinker pulled back its “Three for $20” promotion last summer and retooled it to improve margins in the fall.

National advertising of the $20 dinner for two promotion will begin Monday, Brinker executives said.

Doug Brooks, Brinker’s chairman and chief executive, said traffic had been erratic the past few months amid continued consumer uncertainty about the economy.

“Unemployment and underemployment continue to remain high in what many have dubbed a jobless recovery,” Brooks said.

Steve West, an analyst with Stifel, Nicolaus & Co. of Baltimore, said in a research note Thursday that Brinker’s has long way to go in rebuilding same-store sales and traffic after two years of significant declines.

“Two-year traffic was down 17 percent in [the fourth quarter], which will take several years to recover, especially if the goal is the (recent) high-water mark of [fiscal year 2004], the last positive traffic comp from Brinker (0.9 percent) for a full fiscal year,” he wrote.

Roberts said the company had “expected headwinds for the top line of Chili’s” while the company pulled back from promotions in the fourth quarter.

“While pulling back on discounting impacted the top line, the pressures on margins eased,” he said.

Roberts also said the company plans to finish a new Chili’s “reimaging,” estimated at about $300,000 per unit, in September.

Brooks said Brinker would continue to pursue international expansion, saying it had signed a joint-venture agreement with Montana Partners to develop the Chili's brand in Brazil. As of the end of June, Brinker had 212 Chili’s and one Maggiano’s open internationally. The company said it planned to have 425 units open abroad by the end of 2014.

For the full fiscal 2010, Brinker recorded net income of $137.7 million, or $1.34 per share, compared with year-ago earnings of $79.2 million, or 77 cents a share. Excluding the impact of Brinker's sale of a majority interest in Romano's Macaroni Grill and other special items, the company's per-share earnings totaled $1.18 in fiscal 2010, compared with $1.28 in 2009. Revenue in 2010 fell 12.8 percent to $2.9 billion.

In guidance for the year ahead, Brinker said it anticipates earnings per share to increase 10 and 20 percent compared with fiscal 2010, based on expectations of a flat to 2-percent decline in same-store sales.

Brinker operates or franchises 1,505 Chili’s restaurants and 45 Maggiano's locations. The company also holds a minority investment in Romano's Macaroni Grill.

Contact Ron Ruggless at [email protected].

 

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