Brinker International, parent company of Chili’s and Maggiano’s, reported fourth quarter and fiscal year earnings Wednesday morning, including a 6.6% increase in comp sales, with an increase of 6.3% at Chili’s and 9.1% at Maggiano’s. Total revenues on the quarter increased by $54 million, while they increased by $329 million during the fiscal year, to $4.1 billion.
One of the non-financial highlights from the call is Brinker’s plan to bring its virtual brand, It’s Just Wings, “into the real world,” as CEO Kevin Hochman noted. It’s Just Wings was created in 2021 to cater to growing off-premises demand accelerated by the pandemic and has added incrementality to the business since. The company has maintained its focus on the brand, despite pulling the plug on sister brand Maggiano’s virtual brand earlier this year in response to lower demand.
What that real world application means is the It’s Just Wings menu, including boneless and bone-in wings and a variety of sauces, will be part of Chili’s new bar menu. It will also occupy a smaller section in Chili’s appetizer section for dine-in guests.
“We think this will either be an add-on or a trade-up from appetizers given the price of wings,” Hochman said. Chili’s will leverage a new CRM platform to ensure this menu is top-of-mind for customers, especially during sporting events.
“We do think this will drive the business a little bit, but it could be bigger. At a minimum, it’s a trade up, but we think it could eventually drive some traffic, especially with sports viewing, which starts with football,” Hochman said.
CFO Joe Taylor added that this move will also increase awareness of It’s Just Wings, which has previously only been available on third-party platforms.
“It’s a nice way to expand awareness without the costs associated with a third-party platform,” he said.
On the traffic side of the business, guest counts remained down by about 7.7% on the quarter, and Taylor said the company is now moving into a “more robust traffic driving phase,” after putting strategic foundations into place throughout the past year. Traffic dynamics improved sequentially throughout Q4 and that momentum has continued in the first seven weeks of Q1, he said.
The momentum seems to be coming from all income cohorts. Hochman said lower-income consumers are “hanging in there” with little change on frequency, while higher-income guests are coming in more often. Middle income consumers have dropped off “a little,” but they’re spending more.
“Generally speaking, the consumer is hanging in there. Right now, the consumer environment is there,” Taylor added.
To support its focus on driving traffic, Chili’s is promoting its “Core Four” menu areas, it has doubled down on its “obsession goals” of improving retention at the manager and hourly employee levels, and it has pressed the gas on its national advertising.
That advertising piece will become even more pronounced in the coming months, as Chili’s looks to ramp up its TV presence from four weeks to 21 weeks, supplemented by PR activations, and social and digital content. Hochman is confident this plan will accelerate the chain’s guest counts based on results from Chii’s return to TV advertising earlier this year after a nearly four-year hiatus.
“The first four-week blast we did in March, we saw a sequential improvement versus the industry,” Hochman said. TV spend, he added, has been a proven traffic grower for the brand and he expects that to accelerate with an even bigger presence. That presence will entail about a $55 million to $60 million investment, however.
“Here’s how we’re thinking about traffic. If fiscal year 2023 was a reset year, getting investments in the right places and taking prices to get dollars to reinvest, I would characterize fiscal year 2024 as reinvesting in the business to grow traffic,” Hochman said.
In addition to supporting this ad spend with PR, social and digital, Chili’s is also leaning into its structured menu merchandising strategy. Essentially that means customers who come in for a value offering can find it somewhere on the menu, but “not so obvious that they trade down,” Hochman explained. This adjustment has led to a “significantly” smaller mix of Chili’s “Three for Me” value offering and less shifts into value overall, he said. Hochman is confident in this holistic strategy because of the pieces Brinker has put into place throughout the past several quarters.
“There are three things that define whether (advertising) is going to be impactful. One, I’m confident about the quality of our food and how it looks on screen. Two, we’ve built a world-class team and world-class agencies,” Hochman said. “Third, do you have enough money set aside to move the needle? We saw in that first slug of advertising last year, we’re very encouraged based on the level of spend and the reality is we’re going to do that another four times this year. We’re confident we’ll continue to close the traffic gap and accelerate market share because that’s what we’ve seen in the numbers.”
Contact Alicia Kelso at [email protected]
