EAT Q4 2025: Targets 3–5% Same-Store Sales, 30–40bps Margin Gain
- Sustained Same Store Sales Growth & Margin Expansion: The guidance and Q&A confirm that Chili’s plans to maintain positive comps every quarter, with mid-single-digit growth expectations and expanding operating margins driven by disciplined cost management and operational improvements.
- Robust Product Innovation and Menu Enhancements: The introduction of the upgraded ribs and new Triple Dipper initiatives—with plans for a social influencer push and TV advertising—demonstrates Chili’s ability to drive traffic and sales mix improvements, signaling a strong value proposition and enhanced guest appeal.
- Operational Efficiency Through Tech and Process Upgrades: The upcoming software upgrade for server handhelds, expected to drastically reduce order entry time and improve productivity, along with strategic investments in reimaging and process optimization, underpins a more efficient operating model that supports sustainable growth.
- Maggiano's Turnaround Execution: Concerns remain over whether management can successfully replicate the Chili’s turnaround at Maggiano’s, with uncertainties around aligning the brand’s inherent value with operational simplicity and guest expectations.
- Comps and Margin Vulnerabilities: There is risk that positive same‐store sales growth may falter as the business laps a high prior-year baseline, potentially limiting the modest 30–40 basis points margin expansion amid ongoing inflation pressures.
- Operational and Implementation Risks: Upcoming technology upgrades (e.g., the new handheld software) and potential lumpiness in commodity inflation create execution risks that could disrupt operations and weigh on restaurant margins.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Annual Revenues | FY 2026 | no prior guidance [N/A] | $5.6 billion to $5.7 billion | no prior guidance |
Adjusted Diluted EPS | FY 2026 | no prior guidance [N/A] | $9.90 to $10.50 | no prior guidance |
Weighted Average Shares | FY 2026 | no prior guidance [N/A] | 45 million to 46 million | no prior guidance |
Capital Expenditures | FY 2026 | no prior guidance [N/A] | $270 million to $290 million | no prior guidance |
Tax Rate | FY 2026 | no prior guidance [N/A] | Approximately 19% | no prior guidance |
Commodity and Wage Inflation | FY 2026 | no prior guidance [N/A] | Low single digits | no prior guidance |
Net Company-Owned Restaurant Closures | FY 2026 | no prior guidance [N/A] | 1 to 4 closures | no prior guidance |
G&A Expenses | FY 2026 | no prior guidance [N/A] | Approximately 4% of total revenues | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Same-Store Sales Growth Sustainability | Emphasized in Q1–Q3 with a focus on operational improvements, strong guest experience fundamentals, and consistent positive comps ( in Q1, in Q2, in Q3) | In Q4, the discussion highlighted transformed operations through significant investments in food, operations, facilities and marketing, maintenance of a 17‐quarter streak and a focus on traffic as a key metric ( ) | Consistent confidence with an even stronger focus on sustainability and a proactive outlook going into fiscal 2026 |
Margin Expansion and Deceleration Risks | Q1 emphasized significant margin improvements with an expectation of deceleration in later quarters ( ), Q2 showed a strong 600-basis point improvement with caution about normalization ( ), and Q3 maintained confidence while acknowledging labor normalization risks ( ) | Q4 focused on a more modest margin expansion target of 30–40 basis points for the next year while highlighting a slowing pace of investment and reinvestment in guest experience ( ) | A shift toward a more cautious, measured outlook on margin expansion with continued confidence in long-term fundamentals |
Operational Efficiency and Technology Upgrades | In Q1, efforts included ERP system upgrades and menu simplification ( ), Q2 focused on KDS enhancements, TurboChef oven rollouts, and menu simplification ( ), and Q3 continued similar initiatives with additional technology improvements ( ) | Q4 reinforced these efforts with full installation of TurboChef ovens, significant menu simplification, new handheld iPad applications with offline and split check features, and extensive WiFi upgrades to support operational excellence ( ) | A consistent and deepening commitment to operational efficiency through both process and technology upgrades, reinforcing positive ROI and productivity improvements |
Capital Expenditures and Financial Discipline | Q1 reported modest CapEx ($56M) coupled with debt repayment and share buybacks ( ), Q2 provided guidance in the $240–260M range and detailed reimaging and maintenance investments ( ), and Q3 included $80M CapEx with increased debt reduction focus ( ) | Q4 reported approximately $80M in CapEx for the quarter and set fiscal 2026 guidance at $270–290M, while emphasizing further debt repayment, balance sheet strengthening, and share repurchase programs ( ) | Steady investment in growth assets and disciplined capital allocation, with a slight upward adjustment in future CapEx targeting reflecting a robust growth strategy |
Marketing Strategy, Innovation, and Expense Pressures | Q1 focused on value-driven campaigns and a balanced mix of TV and social media advertising ( ), Q2 stressed strong traffic driven by campaigns like “Better than Fast Food” and Triple Dipper with flat ad spend but planning increased spend later ( ), and Q3 highlighted innovative initiatives (Big QP launch, pop culture tie-ins) and stable value pricing ( ) | Q4 unveiled a multilayered marketing approach with increased ad spend (up to 3% of sales), new value initiatives (e.g., $6 margaritas, renewed $10.99 messages), and tailored expense management actions addressing commodity and labor costs ( ) | An evolution from a balanced marketing mix toward more aggressive, innovative, and value-focused campaigns while keeping tight expense controls amid inflationary pressures |
Maggiano's Turnaround Execution Strategy | Q1 introduced a focus on fundamentals and quick wins in menu and service (e.g. signature cocktails, new dishes) ( ), Q2 centered on simplifying operations and leadership adjustments with new menu upgrades ( ), and Q3 detailed menu simplification with elimination of discounting and a focus on core operational fundamentals ( ) | Q4 emphasized returning to core Italian-American favorites and a “Back to Maggiano’s” plan with deeper leadership restructuring, learning from previous missteps, and aligning operations with guest expectations ( ) | A clear progression from initial operational adjustments to a comprehensive turnaround plan built on lessons from Chili’s, with confidence in long-term sustainable growth despite near-term challenges |
Supply Chain, Tariffs, and Commodity Inflation Risks | Q1 mentioned commodity inflation at 2.5% with guidance for low single-digit inflation for the rest of the year ( ); Q2 provided minimal details apart from planned low single-digit commodity inflation ( ); Q3 offered detailed discussion on domestic sourcing, limited tariff exposure, and pricing offsets for 1.8% commodity inflation ( ) | Q4 focused primarily on commodity inflation impacts with food/beverage costs up by 60 basis points due to 1.7% commodity inflation, and limited discussion on supply chain or tariffs ( ) | Consistent assumptions around modest commodity inflation with less emphasis on broader supply chain and tariff risks in Q4, indicating a narrowed focus on price adjustments to mitigate risks |
Competitive Pricing Pressures | Q1 indirectly addressed pricing execution through leveraging pricing power and value propositions ( ); Q2 noted increased competitive promotional activity testing the value proposition ( ); Q3 provided explicit commentary on maintaining the $10.99 value platform despite heightened market competition ( ) | Q4 did not directly address competitive pricing pressures but detailed pricing strategies such as a barbell approach to maintain value leadership and flexible price increases (tapering from 4% to 2%) ( ) | While earlier periods acknowledged competitive pressures more explicitly, the Q4 strategy reinforces robust pricing practices and value leadership to counter competition, showing resilience in pricing strategy |
Restaurant Closures Impact on Revenue Growth | Q1 discussed that closures of underperforming locations were net neutral to revenue due to strategic balancing with new openings ( ); Q2 and Q3 had no mention of closures | Q4 anticipates one to four net company-owned closures for fiscal 2026, noting these will not affect overall profitability ( ) | A consistent approach where closures are used strategically to improve margins without revenue disruption, maintaining a neutral to beneficial long-term impact |
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Margin Outlook
Q: Margin expansion expectations, details?
A: Management explained that restaurant margins are expected to expand by around 30–40 basis points by leveraging efficiencies in labor, cost of sales, and pricing discipline—with a similar approach intended for Maggiano’s turnaround. -
Comp Growth & Reinvestment
Q: How balance comps and reinvestment?
A: Leaders noted they expect positive same‐store sales in every quarter while reinvesting profits into guest experience improvements, ensuring smart, built‐in investments that support both margin flow‐through and long‑term growth. -
Growth Targets Update
Q: Any update to new growth targets?
A: The team confirmed that while new build plans are being explored, the three‑year revenue and profitability guidance remains intact, with faster paybacks on new restaurants now achievable. -
Same-Store Sales
Q: What drives Chili’s same‑store sales?
A: Management highlighted a balance of a relaxed pricing approach—targeting around 3–5%—paired with flat mix and strong traffic, ensuring consistent same‑store sales momentum. -
Operational Efficiency
Q: How will “north of six” improve throughput?
A: Officials detailed plans to adopt best‑in‑class operational practices from high‑volume restaurants, such as optimizing delivery frequency and staff scheduling, to boost efficiency across the board. -
New Build Strategy
Q: Where can Chili’s be built?
A: The leadership sees opportunities beyond traditional markets—exploring areas like the Northeast and Pacific Northwest—to expand new restaurant builds and relocations while leveraging the stronger margins from existing upgrades. -
Store Reimage Plans
Q: Timeline and scope for reimage?
A: They are piloting a few remodels in key markets to fine‑tune the reimage package, aiming for a gradual ramp‑up to refresh 10% of the fleet annually without rushing the process. -
Core Menu Evolution
Q: How is the core menu evolving?
A: Management is committed to upgrading key items—the so‑called “five to drive” including recent improvements like the rib upgrade—and plans to roll out steak and salad innovations in fiscal ’27 to make all offerings equally compelling. -
Ribs Performance
Q: What’s the potential for rib sales?
A: They noted that the rib platform is already showing impressive results with a 20% increase in incidents solely from improved menu merchandising and quality enhancements, and expect further gains once advertising begins. -
Triple Dipper & Technology
Q: What’s next for triple dipper and tech?
A: A social influencer push and TV campaign are set to bolster the Triple Dipper, while a software upgrade to the server handhelds—reducing order taps by years’ worth of time annually—is planned to improve table efficiency. -
Sales Momentum Trends
Q: Any shifts in sales momentum drivers?
A: Management observed steady growth across all sales channels with no dramatic shifts—they’re successfully growing traffic, mix, and appeal among new and lapsed customers without diluting visit frequency. -
Daypart & Maggiano's Focus
Q: Any differences in lunch/dinner or Maggiano’s focus?
A: Officials reported balanced performance across lunch, dinner, weekdays, and weekends, and stressed that strong leadership and clear time management allow them to focus on Maggiano’s turnaround without distraction.
Research analysts covering BRINKER INTERNATIONAL.