Q1 2025 Brinker International Inc Earnings Call
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<unk> the company's ongoing operations.
And with that said I will turn the call over to Kevin. Good morning, everyone. Thank you for joining us as we share insights from our first quarter and our outlook on the remainder of fiscal 'twenty. Five we are off to a strong start in Q1 with chili's delivering 14% sales growth on a six 5% traffic increase.
Also continued to see meaningful progress on our four wall economics on both brands with Brinker year over year restaurant operating margin improvement of 310 basis points.
Publication and investments, we've been layering into the business over the past two years.
Put us in a position to win in a market where customers want great food great service at a great value.
And from our own guest scores I can say with confidence that our restaurant teams are delivering our daily Chili's metric guests with a problem came in at an all time low of two 7% for the quarter, which is even more impressive given the significantly higher traffic trends.
This would tell us our decision to invest in additional labor in June to keep up with the dramatic acceleration in traffic work to keep service levels High we're excited about our progress and we still see plenty of upside in the business.
At Chili's, we continue to work through improvements in our core menu over the past two and a half years, we've removed around a quarter of our menu to focus on our core four offerings burgers, Christopher's fajitas, and margaritas, which now represent 47% of our business on.
On burgers are big Smash are better than fast food advertising campaign continues to win with guests. The three for me 10, 99 bundle includes an appetizer of unlimited chips and salsa seven in house.
<unk> Burger and fries, and a bottomless choice of Coca Cola soft drink, which is tougher competitors to match.
Our three for me value offer clearly resonates with guests who are looking for high quality and abundance that may not be the lowest price, but it is a very reasonable price and when new guests come in we often get feedback the Burger looks just like the Ed and that no one else has a value like this.
Despite the industry is challenged consumer and our significant traffic lift being driven by the <unk> campaign, we've only seen a 1% increase in through for me mix since last quarter and nearly half of those guests are still choosing the more premium through for me tiers at $14 99, and 16 99, we will continue with the Big Smasher campaign into Q3 a period we.
Consumers seek out value coming off the holiday spend.
On Margarita our barbell strategy is helping to drive the top line and margins with Super premium Margarita is while our Margarita of the month is protecting entry level price points to drive drink incidents in.
In Q1, we introduced a new Super premium Don Julio Margarita and are over $10 price tier the Don Julio is off to a good start in on expectations on the other side of the barbell. The entry price point, we introduced the October six dollar Margaret the months, the Witch's brew and it's now one of the best selling promotional Margarita as ever while some competitors are offering more.
Discounted Margarita is including one being advertised on TV, our success proves that value isn't necessarily offering the lowest price point, but that the price quality equation is critical for this guest our barbell strategy has proven an effective way to meet all our guest needs and balanced great value while driving profitability.
Another key driver of our results is the success of the Triple Dipper, we saw the social media discussion of the triple differ picking up momentum with our campaign in the spring and it remains at high volumes, even six months later.
We recently introduced the Nashville Hot Mop sticks to the triple differ via social media and it's been so successful that we've actually taken that item now to our permanent menu. The triple differ continues to gain steam and now represents 11% of our business with sales up over 70% versus last year, it's very relevant with younger guests and how they.
Prefer to eat with more variety and customization and experiential flavors through a wide variety of dips.
Because of the triple <unk> ability to attract the next generation of guests as well as drive guest check we are expanding our core four menu strategy to become the <unk> to drive with the addition of the Triple defer those five items now represent 58% of our business. We're confident this five to drive focus will increase opportunities for innovation and further accelerate sales.
Growth.
Also want to share some insights into the guest count lift that we are experiencing at chili's that gives us increased confidence in the sustainability of our results. The token Ais data is telling us that we have two big big traffic drivers right now the primary one is or three for me better than fast food campaign, which is bringing in more new guests across all demographics. It turns out that <unk>.
All households, regardless of income one unbeatable value high quality and a great experience.
In addition to increasing Chile's penetration, we also see that guests who purchased three for me returned to chili's more often than those who have not.
The second primary traffic driver is our social media marketing campaign, social mentions about our triple dip or started accelerating in April and may and with people talking experiencing the needed food items that you can only get at Chili's. This dialogue is attracting new guests that come experience. The brand. We now know that guests who purchased a triple dip a skew younger there.
Average is approximately 20% higher and we're driving frequency with that group as well and.
Speaker Change: In addition to getting Cocainize data up and running I am pleased to announce we have a new data analytics leader Alex Knight.
Speaker Change: Alex comes to us from a large restaurant company, where he was the senior director of data analytics, having worked with Alex previously I know he has the experience and track record to build out our data analytics capabilities to accelerate our business.
Speaker Change: In summary, these strong business results are being driven by great marketing, which is doing an exceptional job of bringing guests in and these results are being sustained by the improved guest experience. Our restaurant teams are delivering our operations leadership shows traffic as their fiscal 'twenty five of session metric and they are delivering by focusing on a few simple fundamentals of the <unk>.
Speaker Change: Our guest experience and then executing like Crazy.
Speaker Change: Now I'd like to give an update on <unk>, we are applying lessons from the chili's turnaround to our <unk> brand to strengthen the four wall economics and help build more relevance back into the brand what are my channels, President Dominic Barcelona calls, bringing the magic back Dom.
Speaker Change: <unk> spent the past six months deepen the field listening the <unk> teammates to understand what's working and what needs to change to improve the brand's experience now.
Speaker Change: Now dominant leadership team are focused on the fundamentals simplifying the menu and operations. So we can elevate the food speed of service.
Speaker Change: And more relevant.
Speaker Change: And we already have a few quick wins, the new cocktail innovation in Master Sommelier, one curation, we launched last quarter has successfully reversed a 10 year declining alcohol trend.
Speaker Change: And the <unk> old fashion, which is presented to the guests in a smoking box has quickly become the <unk> number one selling cocktail. We also recently launched two classic dishes that our guests are already raving about and are mixing very well rigatoni Ala vaca and a new <unk> signature Caesar salad finished table side.
Speaker Change: Tom and team are also working on simplification to ship labor to areas that will improve the guest experience, which in turn will drive profitable and sustainable growth. One example of the simplification is removing a $6 take home pasta offerings to prepare and packaged six different take home meals daily requires significant kitchen prep labor.
Speaker Change: As well as time for service to sell this offering to guests, but it's not a profitable business driver. We estimate that exiting this business in December will be a 1% drag on margin of those top line and traffic assumption, but will have minimal impact on profitability. The time attention and investment we are putting towards $6 take home passes will now be redeployed to elevating and accelerating the business.
Speaker Change: I am excited to share more details of the <unk> transformation plan to bring the magic back in future calls.
Speaker Change: Lastly, I did want to quickly give an update on initiatives that is touching both brands are moved to replace legacy back office systems with a modern Oracle ERP system.
Speaker Change: The objective of this project is to upgrade to a more stable secure and productive back office system, which touches finance supply chain and human capital management.
Speaker Change: In the middle of the transition now and overall, it's going well, we're experiencing the normal bumps you would expect with a large scale ERP implementation and the team has done a good job working through these bumps and managing the change most importantly, the Oracle transition has not materially impacted our day to day operation and this is evidenced in our great results.
Speaker Change: I am very encouraged by the momentum of our business. Our results demonstrate we are working on the right things the right way to drive long term growth. Specifically Q1 results are a proof point that we are building significant and sustainable improvements in both the top and bottom line our focus on consistently improving the fundamentals of casual dining foodservice atmosphere and team member engagement.
Speaker Change: It is working.
Speaker Change: This improved experience combined with being driving differentiated relevant brands is becoming <unk> unique strategic advantage that we believe will consistently outperformed the industry.
Speaker Change: Now I'll hand, the call over to Mike to walk you through first quarter numbers and our updated guidance for the remainder of the year.
Mike: Thank you, Kevin and good morning, everyone.
Mike: Our first quarter results represent a great start to the fiscal year and as Kevin shared are a reflection of the success of our long term invest to grow strategy.
Mike: As noted in our press release once again, we saw strong year over year topline growth comps.
Comp sales and traffic well above industry averages and significant restaurant margin expansion.
Mike: For the first quarter Brinker reported total revenues of $1 billion $139 million with consolidated comp sales at positive 13%.
Mike: Our adjusted diluted EPS for the quarter was 95.
Mike: Up from 28 last year.
Mike: <unk> brands reported topline sales growth with Chili's comps coming in at positive 14, 1% driven by price of six 8% positive mix at 0.8% and positive traffic of six 5% with traffic improving sequentially throughout the quarter.
Mike: These impressive results were driven by the continued success of our marketing campaigns on both television and social media highlighting our industry, leading everyday three for me value and our popular Triple Dipper Appetizer, we're encouraged to see that our restaurant teams continue to deliver record guest metrics.
Mike: Trading material improvement in the overall guest experience at even higher sales volumes.
Speaker Change: Turning to <unk> the brand reported four 2% positive comp sales for the quarter driven by 10, 8% price positive two 1% mix, partially offset by negative eight 7% traffic as Kevin mentioned Dominique and his team are making progress at <unk> and we're seeing some early signs those initial.
Speaker Change: They are working I'm happy to share that <unk> had a solid first quarter with year over year operating income up an impressive 117% primarily driven by increased alcohol mix.
Speaker Change: <unk> effort and labor productivity.
Speaker Change: At the Brinker level, we made significant progress on flow through this quarter with restaurant operating margin coming in at 13, 5%, an impressive 310 basis points improvement year over year, primarily driven by sales leverage from top line growth. This resulted in favorability in all categories.
Speaker Change: Food and beverage cost labor and restaurant expense.
Speaker Change: Food and beverage costs for the quarter was favorable 60 basis points year over year benefiting from higher price, partially offset by two 5% commodity inflation.
Speaker Change: The labor for the quarter was favorable 130 basis points year over year, despite incremental labor investments topline growth offset wage rate inflation of approximately four 3%.
Advertising for the first quarter was flat year over year, but marketing costs will ramp up versus prior year as we progress through the fiscal year.
Speaker Change: Each time, we go on air with our three for me messaging, we pick up momentum we are particularly pleased with how our advertising strategy continues to deliver positive laps versus prior year media windows.
Speaker Change: G&A for the quarter came in at four 5% of total revenue with the year over year increase largely driven by an increase in performance based compensation expense.
Speaker Change: First quarter, adjusted EBITDA was $112 million, a 55% increase from prior year.
Speaker Change: We will continue to prioritize paying down debt for the remainder of the fiscal year and we have used our revolving credit facility to repay the bond that came due in October.
Speaker Change: Capital expenditures for the quarter were approximately $56 million driven by capital maintenance expenses and new restaurant development.
Speaker Change: We did open one new restaurant during the quarter and Leander, Texas with opening week sales over $160000.
Speaker Change: This is the latest in a string of openings that all have well surpassed their hurdle rates and current brand averages, which demonstrates the increasing strength of the chili's brand, particularly in new markets.
Speaker Change: While it's still early in the quarter were excited to see strong momentum as we finished our first month of Q2.
Speaker Change: Tober comp sales to date for Chili's remain in the double digits with positive traffic and we continue to increase our gap to the casual dining industry.
Speaker Change: In terms of our expectations for the balance of the year as noted in this morning's press release, we are raising our fiscal 2025 full year guidance to include the following.
Speaker Change: Annual revenues in the range of $4 7 billion to $4 $75 billion.
Speaker Change: Yes.
Speaker Change: Adjusted diluted EPS in the range of $5 20 to.
Speaker Change: To $5 50.
Speaker Change: Our existing guidance for weighted average shares an annual cap capital expenditures or also reiterated.
Speaker Change: Assumptions underlying this guidance include planned commodity inflation and a low single digit wage inflation in the mid single digits and a tax rate in the mid double digits.
Speaker Change: I am very proud of the work our teams are doing to put the guest and team member first and the smart investments, we're making into the business to make their experiences better we've demonstrated that when we do what is right for our team members and guests positive sales and profits follow our business continues to drive outstanding positive sales and trap.
Speaker Change: As well as material margin expansion I am confident our investments into food service and atmosphere are the foundation that will drive the business for the long term.
Speaker Change: With our comments now complete I will turn the call back to Holly to moderate questions.
Holly: Thank you at this time, we will be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question. Please pickup your handset if listening on speaker phone to provide optimum sound quality.
Holly: Please hold while we poll for questions.
Speaker Change: Your first question for today is from Jeff Farmer with Gordon Haskett.
Jeff Farmer: Good morning, and.
Jeff Farmer: Impressive quarter to say the least.
Jeff Farmer: Couple of model questions for you. So the first one would be.
Speaker Change: You gave a lot of updated guidance.
Speaker Change: Since items, but how are you thinking about the restaurant level margin.
Speaker Change: For the year with a strong <unk>.
Speaker Change: Sales performance through Q1.
Hi, Jeff we do think that we're going to continue to drive restaurant level margins and so I think now we will be probably 100 basis points or more favorable year over year.
Jeff Farmer: Okay. That's helpful. And then just on advertising you've talked about this a little bit over the last couple of calls.
Jeff Farmer: Just to compare and contrast, just remind us how many television advertising, which you had in 2004 and then what you're contemplating for 2025.
Speaker Change: So I have the weeks in front of me for 2025, So we'll be on air a total of.
Speaker Change: 31 weeks.
Speaker Change: But I don't have the number of weeks from last year in front of me.
Speaker Change: I will tell you.
We can get you the specifics of.
Speaker Change: The actual spend versus a year ago, and a little bit. So just give us a little time when we can calculate that for you. So you can at least start gas market I have I have the dollar so its an incremental four weeks I think year over year that we have and so.
Speaker Change: Whats going to happen is I think it's more important to understand how the dollars are going to flow for your modeling.
Speaker Change: They're going to be up probably $3 million to $4 million for the second quarter, and third quarter and up a little bit more in the fourth quarter, probably closer to $7 million. So that's how that advertising spend will spread.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thanks, Jeff.
Speaker Change: Your next question is from Chris I'll call with Stifel.
Speaker Change: Thanks, Good morning, guys and congratulations on another strong quarter.
Speaker Change: Thanks, Brad.
Speaker Change: Kevin.
Chris: Great to see the company gain insights from the token Ais data I was wondering if you could provide some more color on how you plan to use these insights to continue the traffic and sales momentum.
Speaker Change: Yes.
Speaker Change: I think probably the most important thing about loyalty and CRM is going to be the mining of the data to understand how our.
Speaker Change: Initiatives are performing in market. So for example, I think before we had token Ais data.
Speaker Change: It was more difficult to understand like who is coming in from the Big Smasher campaign, who is coming in from the social media campaign on Triple Dipper health.
Speaker Change: How frequently are they coming are they coming back within the next 90 days after.
Speaker Change: Trying the brand for the first time.
Speaker Change: So these are things that allow us to understand not just the marketing that we put in place to try to attract new guests, but then work because we have the transaction level data, we're able to understand what are they by ended they come back.
Speaker Change: How long does it take them to come back. So if like for example, we now know that if youre at Chili's guests this year versus.
Speaker Change: Versus before we had kind of the.
Speaker Change: The real acceleration in traffic in May.
Speaker Change: Call last year, a chili's guests. If you if you were till it gets you came back every 37 weeks now we know based on what we believe is the experience improvements that same guest is coming back every 31 weeks right. So it gives us more confidence about our strategy, it's about improving the fundamentals of casual dining so better food better service and a fun.
Speaker Change: And friendly atmosphere, those are very hard things for us to model. It's very hard for you guys to model two rate versus like did Eyedrop X amount of coupons or did I do something with my CRM program right and so when we start having the insights on what is actually it changed how the changing consumer behavior and we can connect that to the transaction level detail of sales gives us a whole lot more.
Speaker Change: Confidence that the investments that we're making are going to drive the sustainable long term growth and honestly. That's the key to this whole thing is like believing that these improvements on the fundamentals of casual dining will in fact sustainably grow the business and now we have more insight of what things are working what things may not may need some tweaking.
So I hope that make sense Chris.
Speaker Change: No. It does that was very helpful.
Speaker Change: Also had a question about menu pricing of Chili's.
Jeff Farmer: The three for me platform, the big Smash or the three for lunch combos I'll offer consumers price certainty I'm just wondering as these platforms and products grow and mix. It would seem you would need to raise prices more aggressively on other menu items.
Speaker Change: Or are you thinking about this dynamic.
Speaker Change: Youre exactly right, Chris we just have to make sure that we're managing the merchandising.
Speaker Change: So the mix the mix doesn't go.
Speaker Change: Sideways on us right because at the end of the day. The barbell strategy is dependent on meeting all guest needs not just the extreme value guests. So.
Speaker Change: So we look at this very closely and it's one of the reasons why we shared that in our prepared comments I know that's on everybody's mind.
Speaker Change: Despite all the success in traffic that we had for the quarter. We only saw the three for me mix increase a point and were still selling almost half of the three for me is at the higher 14, 90, 916, 99 price tiers, which is accretive to check so.
Speaker Change: We just got to continue to keep our eye on it. The good news is in California, and we tend to have an early warning system. If we see something that we're going to get a check it would probably start in California, just based on its a more expensive to do business there.
Speaker Change: There is more sensitivity to that dynamic that you're talking about because we're one of the few concepts that no matter, where you go into country youre going to be able to get that 10 million nine advertise value, including California, So that'll give us an early warning whether things.
Speaker Change: Our going in a place that we don't want them to go but so far I think just making sure that we continue to offer premium items at the same time of offering entry point price value. It seems to be working to control that mix and not give us.
Speaker Change: Any kind of trouble from our P&L or a restaurant level margin standpoint.
Speaker Change: Great. Thanks, guys.
Speaker Change: Your next question for today is from Dennis Geiger with UBS.
Great Hey, guys and congratulations on another modeling question first if I could following that strong flow through in the first quarter wondering if you could touch a little bit more on the investments through 'twenty five Mike great color on sort of getting the all in restaurant margin for the year and the perspective on marketing just anything.
Speaker Change: More on cadence. So I think R&M is coming down as we go through the year anything else to be thinking about on those investments or other sort of margin items as we go through the year here.
Speaker Change: Dennis I think that the big one the big Big changes again or marketing, that's why I mentioned that one.
Dennis Geiger: Wanted to be clear on the dollars I think I talked about that advertising was going to I mean, R&M was going to continue to be up in the first quarter up slightly in the second quarter, we will get flat in the third and probably favorable in the fourth.
Dennis Geiger: So those are some of the big expenses as they flow through.
Dennis Geiger: I will say that we had great restaurant operating margin expansion in Q1, I think youll.
Dennis Geiger: We will continue to see some outsized margin improvement in Q2, it will probably start to moderate and three and four just because we're lapping even better numbers as the business had started to ramp up. So you can think about it that way is how margins I think they will improve every quarter, but the largest improvement will probably be in the first and second quarter.
Dennis Geiger: Yes.
Speaker Change: Very helpful. And then just the second one is just on the social media.
Board or initiatives that you highlighted as one of the two primary drivers of this impressive traffic and sales growth. So wondering if you could talk a little bit more about what the team has done to sort of help this initiative and perhaps.
Speaker Change: Some of the external factors from Influencers et cetera has helped and obviously this has gone on for an extended period of time. So just kind of thinking about the work that you've done and how much you can control and kind of continue to control and kind of making this this aspect of the growth a bit more sustainable. Thank you.
Speaker Change: Yes.
Speaker Change: From what I was a market or a lot has changed to today.
Speaker Change: The tools that are available to the team we have an exceptional I mean literally an exceptional leader and lose beckert, who runs our social media program.
Speaker Change: Number one she and her team are.
Speaker Change: We are constantly monitoring the trends and the insights that they are seeing in social media literally every day is a big part of their job and then too.
Speaker Change: They worked very effectively with professional agencies that.
Speaker Change: Our experts and Influencer.
Speaker Change: In working with Influencers and understanding how to translate those insights into <unk>.
Speaker Change: Content, that's going to be exciting and craveable for.
Speaker Change: Hopefully future guests, our current guests right to get them to engage with the brand and understand what items that we offer at chili's and how they might be relevant to them right. So it's.
Speaker Change: It's a very deliberate investments that go into so as we talk about the marketing dollars that we shared with you guys Thats all baked in in terms of the social media platforms and then we have an exceptional team that really they are professionals and what they're doing and they've been doing this for a while and you can see that.
Speaker Change: We're constantly thinking about how they're going to continue to sustain that momentum in that conversation.
Speaker Change: In <unk>.
Speaker Change: In social media so.
Speaker Change: At this point, where typically when you see something that goes viral or theres something it really catches fire in social media, that's a pretty.
Speaker Change: Short flame and the fact that we've just continued to be able to maintain these high levels of social impressions tells you something about the quality of that team and the results that we're delivering.
Speaker Change: Great. Thanks, guys congrats.
Speaker Change: Thanks Dennis.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Your next question for today is from David Palmer with Evercore ISI.
David Palmer: Good morning.
David Palmer: Congratulations on what has been a spectacular.
David Palmer: Brand strategy and recovery.
David Palmer: Wanted to ask you just a simple one about the near term sales, but also I want to ask you something longer term on our unit growth.
David Palmer: Since you have had so much success.
David Palmer: Maybe how youre thinking about that.
David Palmer: How is that strategy evolving in your mind as you look beyond this year and how do you think about.
David Palmer: Capital strategies, but in the near term.
Speaker Change: How are sales trends evolved.
Speaker Change: Versus the industry through the quarter, maybe into this quarter. How are you thinking about that going forward and what how is that informing how you what's working and not and then as far as the unit growth goes I wonder.
Speaker Change: Are you getting to return thresholds, where you might think about pedal to the metal or are you maybe I'm thinking about it.
Speaker Change: Tweaks to the format.
Speaker Change: And maybe help us think through how you are thinking about our early thoughts on fiscal 'twenty six thanks.
Speaker Change: Okay, well, you've got a lot of a lot of questions in there.
Dave: Dave So what I heard is you asked about sales and so on sales they actually accelerated throughout the quarter and our gap to the industry accelerated throughout the quarter and that trend continued into October. So we're very pleased with the momentum again every time, we go on air we continue.
Dave: To pick up it seems like even more momentum with it with the industry leading value. So we couldn't be more pleased with how.
Dave: That trajectory continues to go.
Dave: Yes.
Speaker Change: Good morning, Dave I can handle the unit question so.
Speaker Change: So right now just the short answer is that.
Speaker Change: We have no change in the approach and the net new units that we've that we've shared with you. Prior I will tell you we are going through.
Speaker Change: Capital allocation discussions internally.
About okay. We've got all these new opportunities in front of US based on the success of the business.
Speaker Change: Should we start thinking about deploying capital differently and the options that we have are obviously, we can accelerate new builds the new builds that we've done now it's at a slower pace than they were a couple of years ago, but the newbuild that we've done we're very excited about the return so that's an option right.
Speaker Change: The thing I'm challenging the team on now is do we want to continue to build out existing markets or can we are there is a white space markets on both brands on <unk> channels and Chili's that we could go into that might be more incremental for our business, but so that's one option. Another option is we do have an estate that.
Could use some re imaging and so I personally did some tours last week to understand the different prototypes within the system and what are the prototypes that we want to try to deploy capital faster because you think about the brand getting more and more relevant and needs to be relevant everywhere not just the newer builds.
Speaker Change: And not just with menu and social media has to be relevant everywhere and so I think that's a great opportunity for us and that's typically where you get the better it re imaging returns when you start with older assets that havent been touched in a while and then obviously there is other capital allocation discussions that we have to have in terms of returning capital to shareholders et cetera. So the answer the short answer is.
Speaker Change: There is no change to the guidance that we've given you on net.
Speaker Change: Net new unit.
Speaker Change: The success that we've had in the business. It certainly opens up additional opportunities to deploy capital and once we have those answers and we're aligned with our board, we'll certainly share that with all of you.
David Palmer: And David just one follow up on that just I think there can be some questions out there again, so capital allocation strategy hasn't changed as Kevin said first priority is to invest back in the business.
Speaker Change: You did see that we bought back some shares in the first quarter and that was as planned we wanted to we all.
Speaker Change: These buyback shares to offset dilution. So we took care of that in the first quarter now that we have.
Speaker Change: Taken the October bond, we've put that onto the revolver. So we will resume paying down our debt. So that will now be our our second party has to pay down our debt and then third is to return cash to shareholders.
Speaker Change: That's where we are now was there any other piece of your question we didn't answer.
Speaker Change: No that was great thanks, and congrats again.
Speaker Change: Thanks, Dave.
Speaker Change: Your next question is from Brian Vaccaro with Raymond James.
Brian Vaccaro: Hi, Thanks, and good morning.
Brian Vaccaro: Couple of quick ones for me just on the quarter to date comps I guess in the spirit of setting reasonable near term expectations would you be willing to be a bit more specific on what youre seeing in October maybe kind of level setting relative to what you put up to 14 in the first quarter and any incremental color you'd be willing to provide.
Brian Vaccaro: Brian just because it is early in the quarter.
Speaker Change: We don't want to get too specific about what we will say is we're very pleased we did say double digit sales in October positive traffic.
Speaker Change: We're lapping the media window very nicely. So we're excited about that.
Speaker Change: Alright fair enough.
Speaker Change: On the topic of mix I'm guessing it was up 80 bps I think at Chili's I'm guessing that's mostly from the triple differ but Kevin.
Speaker Change: Your comment on the Margarita growth and the success Youre seeing in the six dollar category I'm curious just what you're seeing broadly in terms of year on year alcohol sales overall and do you expect mix to maybe be a tailwind for the next few quarters.
Speaker Change: So Brian let me, let me start out on that and Kevin can jump in if he has any color, but alcohol our alcohol mix has actually been pretty flattish so far.
Speaker Change: That is slightly negative like everyone else's, but we are more profitable with alcohol with the new premium Margaret is that we've introduced we are very pleased with the market of the month and the success of that so it is helping us to kind of hang in there on the alcohol now taking it up on mix a little bit we did introduce the new three for lunch.
Speaker Change: Combos that was really late in Q1, so I don't have a lot of data to share, but we do think this is a positive mixed driver that will have an a.
Speaker Change: More more information as we end the second quarter, but I do think our mix will be positive through the second quarter than as we lap different things it could flatten out a little bit in the back half of the year, but where I. Originally said mix would be flat to slightly negative I would now say it could be more flat to slightly positive, especially with the <unk> rollout.
Of the lunch combos.
Speaker Change: Alright, that's great and then just last one for me.
Speaker Change: Looking at the fiscal first quarter margins.
Speaker Change: Mike did you say advertising dollars were flat year on year did I hear that correctly.
Speaker Change: They were basically flat.
Speaker Change: The dollars will ramp up in the next three quarters, Okay, and then on R&M, specifically can you share what was the change in dollars in the first quarter and do you still expect R&M dollars to be down around 10 million Bucks versus fiscal 'twenty four.
Speaker Change: I think I gave a range of $8 million to $10 million favorable so that'll depend as the year progresses and how we.
We manage those repairs, but it was basically in line with what we expected so R&M that chili's R&M, specifically kind of matters what different lines you grouped together, but that was still up about eight or $9 million, which was our expectation and again I think that will still be slightly up in Q2 flattish in Q3 and favorable.
Speaker Change: In Q4, so that's kind of the cadence goes of saving that $8 million to $10 million year over year.
Speaker Change: Great. Thanks, very much I'll pass it along.
Speaker Change: Youre welcome.
Speaker Change: Your next question is from Jeffrey Bernstein with Barclays.
Jeffrey Bernstein: Great. Thank you very much.
Jeffrey Bernstein: Two questions the first one.
Jeffrey Bernstein: Kevin you talked about the.
Jeffrey Bernstein: New guests and increase frequency, which presumably is key to driving further traffic acceleration.
Jeffrey Bernstein: Wonder if you could share any new color on your learnings there I think you mentioned something about maybe frequency has come.
Jeffrey Bernstein: An improved every 31 weeks versus 37, I'm just trying to get some more color. If that's the way you look at it primarily.
Jeffrey Bernstein: Maybe if you have any metrics to compare that to peers across casual dining or elsewhere, just trying to get a sense for any specific metrics you guys use to demonstrate that youre seeing kind of that ramp up in frequency.
Speaker Change: Yes, so we don't we don't have any.
Speaker Change: Benchmarks for our competitors. This is the <unk> data of how we are able to understand which guests at the transaction level detail are coming back and when are they coming back so does.
Speaker Change: It does not really much more color to give you other than.
Speaker Change: Number one we're growing with all income cohorts now so <unk>.
Speaker Change: <unk> for everyone and when you have growth like we're having on that brand.
Speaker Change: You'd likely would see it across.
Speaker Change: Demographics and you are so theres no theres no demographic that we're not winning with.
Speaker Change: As far as the detail on the two drivers that I'd shared through for me and.
Speaker Change: The triple differ the three for me.
Speaker Change: As with all households are skewing.
Speaker Change: Tad older is not significant.
Speaker Change: And it might be a function of how we're placing the advertising and more traditional TV.
Speaker Change: And then the Triple Dippers skewing younger so essentially.
Speaker Change: We feel like we're introducing a whole new generation of Chili's.
Speaker Change: And so that's good and then another really good thing is this frequency data point that I shared so if you go to Chili's, we've compressed your purchase cycle from 37 weeks at 31 weeks.
Speaker Change: What that tells you is they're having a good experience they are coming more frequently which means that we're we're.
Speaker Change: We're not just in their rotation, but we're being chosen more often than we were a year ago. So.
Speaker Change: Those data points give us confidence that we'll be able to sustain.
Speaker Change: Some of these gains are if not all of these gains and as we get more and more insights from the token Ais data, we'll make sure we share it with all of you.
Speaker Change: Got it and my follow up was just on the restaurant margin.
Speaker Change: Michael clearly 300 plus basis points in the first quarter impressive I think you said 100 basis points for the full year. So obviously, we are going to see.
Speaker Change: Those benefits.
Speaker Change: Pulled back materially I guess in the back half as you lap the strength from last year, but.
Speaker Change: Color you can provide.
Speaker Change: How we should think about margins over time, whether it's in the range of performance you're currently seeing across your system to contextualize some of the better margins out there.
Speaker Change: I'm just trying to gauge what the upside opportunity is if sales continue to deliver whether or not maybe you look historically or for your best performing markets. How do you think about where the restaurant margins can go beyond just this year, but over the next few years, how do you think about the business. Thank you.
Speaker Change: That's a great question Geoff so obviously.
This whole strategy has been built around it's an investor growth strategy and we always said we were going to improve the four wall economics, but we're going to do it by investing in the business and growing the top line and so I think we've demonstrated over the last two years when we improve the topline we absolutely can flow through and have some great sales leverage so depending on.
Speaker Change: How fast we continue to grow revenues I think we're going to continue to improve our margins.
Speaker Change: Fact that now we're getting back to those historical margins where people say can.
Speaker Change: Can you get back to the mid teens I think that is well within range.
Speaker Change: At this point and that also includes a lot of changes in the model that.
Speaker Change: No.
Speaker Change: Like sale leasebacks and things that happened in the past that would have taken that down so that's even more impressive.
Speaker Change: And then also I think that's really critical is our new pricing strategy. So again, we continue to be focused on execution. When we're focused on execution that gives us more pricing power and we're going to make sure that we use that pricing power to make sure. We price ahead of March.
Speaker Change: Ahead of inflation, and then that allows us to protect those margins. So I just think we have an all around better strategy to drive our margins.
Speaker Change: All of the underlying initiatives such as simplification.
Speaker Change: The pricing strategy, all the things are helping us.
Speaker Change: To make sure those margins have opportunity to continue to grow in the future.
Speaker Change: Thank you.
Youre welcome.
Speaker Change: Okay.
Speaker Change: Your next question for today is from Andrew <unk> with BMO.
Speaker Change: Hey, good morning, Thanks for taking my questions. My first one you gave some helpful color on the marketing spend cadence.
Speaker Change: It gives me for the rest of this year, but I guess I'm wondering how the marketing spend as a marketing approach.
Speaker Change: Over the next couple of years is there room or do you want to take weeks higher in the future do you look at placements I guess I'm just.
Speaker Change: Thinking about how you continue to evolve that approach between linear and digital.
Speaker Change: Yes, Andrew Thanks for the question.
Speaker Change: So it's really the marketing teams. So every year when we go into planning.
We look at.
Speaker Change: Do we want to continue to make incremental investments are just are just flow the percentage of advertising as a percentage of sales. So that's the first question is do we feel like there's opportunities to continue to get the return that we've been getting from the advertising spend there is no. We have no data right now that would suggest that we wouldn't continue.
Speaker Change: Increase the investment as we continue to grow the business right. So that will be 0.1, which is like magnitude and then the second would be and then how do you deploy those dollars I think the things that we're learning on social media also what we're learning on television.
Speaker Change: Well taken that new account and start planning.
Speaker Change: Whatever incremental dollars. After next fiscal so typically you start with are your are your weeks do you feel like there is sufficient or is there opportunity to make them upside to create upside and then once you get there then it's do you want to add additional weeks in which is the bulk of the spend in TV. So from a social media standpoint. It really involves it's just not as linear.
Speaker Change: <unk> in terms of.
Speaker Change: Weeks on air and frequency, it's more about what are the priorities of the brand and to communicate that we think is content worthy and how are you going to deploy that from a social media standpoint. So.
Speaker Change: That's the way, we think about it I think we'll have more to share.
Speaker Change: <unk> sometime in the spring as we think about the next the following fiscal based on what we learned for this fiscal we're still pretty early into this fiscal.
Speaker Change: This incremental spend so as we learn more we'll make sure we share it with you.
Speaker Change: Okay, Great and then.
Speaker Change: Last quarter, there was a discussion about the cadence or sequencing of of your initiatives.
Speaker Change: How some of those were moving around a little bit I guess as you can.
Speaker Change: To see momentum in the business is there.
Or are you considering kind of further evolving the timing of that sequencing.
Speaker Change: Moving away from the Big Smash hit other menu news or any of the other kind of strategic priorities that you've put in place for the balance of this year into next year. Thanks, Yes, youre thinking about the way we're thinking about it is that we're not going to be blind to what we're seeing from a result standpoint. So.
The current plan right now is to continue the biggest measure as I said in the prepared comments through Q3, and then we're going to pivot to a new a new innovative item on the three for me in Q4, obviously, if we continue to see the same results that we've been seeing with the biggest macerich campaign throughout Q3, we would we would revisit that decision.
Speaker Change: So I think theres more to come on that based on how the business evolves, but we've been basically running the same campaign now.
Speaker Change: For over 18 months with the same ads and the business continues to accelerate so.
Typically.
Speaker Change: Corporations get bored with their messaging before the consumer does which is funny because we see the same ads over and over but the reality is as long as the data continues to deliver our loan as the data continues to show that the ads are working why would we then change them just because were bored of them when the customer is still learning about three for me.
Speaker Change: We see that within the <unk> data too we're not just seeing new customers come in for the Triple dip, where we're seeing them come in.
Speaker Change: Three for me so more to come on that obviously, we're going to we're going to stay close to the trends, but as long as we continue to have the same success will continue to delay moving off the message to something else.
Speaker Change: Until we see otherwise.
Speaker Change: Great. Thank you very much.
Speaker Change: Okay.
Speaker Change: Your next question for today is from John <unk> with J P. Morgan.
Speaker Change: Hi, Thank you.
Speaker Change: Turnaround in your results I mean is truly remarkable and it actually had me think how many times in my career I've seen it happen before.
Speaker Change: Maybe it was Mcdonald's in 2003, which they sustained maybe it was domino's 2010, which they sustained but really you're just you're in a class of a very very few that I can't really think of.
Speaker Change: Such acceleration, especially for what is kind of a difficult category. So Kevin I'll ask you.
Speaker Change: Is there any case study or anything that you kind of look at from an earning from our learnings experience in terms of.
Speaker Change: I'll use the word <unk>.
Speaker Change: Catching lightening in a bottle but.
Speaker Change: You are in a very special place in terms of the level of outperformance that you have both from a traffic and total comp perspective.
Speaker Change: What type of paradigm.
Speaker Change: If any have you seen that we can kind of point to why this can really be a multiyear event.
Speaker Change: Well I think we shared in Investor day.
Speaker Change: 18 months ago kind of what we're at kind of these thoughts were inspired by number one there is a best in class casual dining competitive that you guys track that.
Speaker Change: No secret on on there.
Speaker Change: <unk> success to win right, which is the fundamentals of the casual dining great food, great experience and have fun and friendly atmosphere and that was that was what we had embarked on 18 months ago.
Speaker Change: To get after right and now we're starting to see the fruits of those investments and the fruits of that labor come to bear I don't think thats going to change like I still think those are the things that are going to win.
Speaker Change: In recessionary times and non recessionary times.
Speaker Change: I think the fundamentals of why a customer goes out and being able to win on those things are going to continue to win and so the challenge for our team to keep it going is what does it whether the next things that we need to do to continue to improve the chili's experience, whether it's a food from a food standpoint, or a service standpoint, or whatever and so it's funny, we're going into our planning season for next.
Physical and when I look at the things that we're really proud that we've been able to accomplish and I look at what's still left on the plate I still think more of the changes are ahead of us than behind US. There are so many more things that we can do to continue to improve the experience. So so.
Speaker Change: So that's the first thing I would tell you and then obviously, we look at some of the more modern concepts and their the way they do marketing and the way they are attracting new guests and we're trying to replicate some of those things and so.
Speaker Change: I know some of the characters that you guys follow and understand they've done an exceptional job and we've learned a lot from them and brought those into the business to so I would share with you it's kind of a little bit of old school.
Speaker Change: The fundamentals of.
Speaker Change: Casual dining in our restaurants have been a little bit of new school with how do we how do we make sure we stay relevant and reach new customers in ways that they expect to be reached versus some of the more traditional ways.
Speaker Change: Like the old School, New school, that's a perfect way to characterize it and then secondly, and I apologize if I missed this word or are we still working on kind of Relaunching fajitas. I mean is that still a front burner activity for you guys. How big of an opportunity do you think that is yes.
Speaker Change: Yes, we still think it's a big opportunity, we're debating whether it's going to be like the number one priority from a marketing standpoint, because once again, what we have in advertising right. Now continues to work. So it's like why would you change that especially when you're in an environment where value is so important, especially on and your advertising on television.
Speaker Change: So right now the fajitas relaunch is still on track for Q4, we plan to make a huge deal about it from a menu merchandising standpoint, and a feature card standpoint, we.
Speaker Change: We will probably have some out of store advertising or marketing behind it it probably won't look like the three for me campaign that you've come to understand in terms of the level of waste and the visibility of it.
Speaker Change: But we still think it's a big opportunity. We also think there is a lot more opportunities throughout our menu to continue to improve.
Speaker Change: We're looking at appetizers now we're looking at ribs. We're looking at continued innovation on triple differ which I talked about my prepared comments and expanding the core forward now to the five to drive and that idea has really excited that team to create innovation on triple different that we haven't been thinking about prior obviously the Nashville Hot months was the first.
Speaker Change: Innovation, we've had on triple different in a long time that has worked and that has kept our team super fired up about what's next to continue to bring news to the triple differ so I think youre going to see a lot more than just fajitas, especially as we start talking about the next fiscal year in terms of continuing to upgrade our menu and once again as I said earlier as long as we continue to make improvements on.
Speaker Change: The fundamentals of casual dining.
Speaker Change: Great food, Great service in a fun and friendly atmosphere I think we're going to continue to win in this marketplace.
Speaker Change: Sounds good thank you.
Speaker Change: Okay.
Speaker Change: Your next question is from Alex Slagle with Jefferies.
Alex Slagle: Alright, good morning, Great work here.
Alex Slagle: I'm curious if there any new eye opening dynamics, starting with the big jump in traffic now, it's like half a year of sustained higher volumes in it.
Alex Slagle: What are the biggest things that your restaurant teams are talking about if theres anything new that they need at the top of their list to help them out.
Speaker Change: Yes, it's a great question.
Speaker Change: Number one continued simplification, where we continue to hear from the restaurant teams. So anything you can do to make my life easier either in terms of the prep steps for heart of house cooks or the amount of administration that our managers have to do to run the business and so we continue to get after that every basically every period, we have some new rollouts that are going to simplify.
Speaker Change: The heart of house or the front of house.
Speaker Change: Steps that they have to take to serve the guests to make food.
Speaker Change: And that will continue so we.
Speaker Change: We have a more formal team now that.
Speaker Change: That literally takes all of these simplification ideas prioritizes them and get them ready for a restaurant and then roll them out and I mean.
Just the way we do business now so that's kind of 0.1. The second thing that we're looking at is what equipment that we need to make sure that we have in place to handle the higher volume. So we've established a we.
We call. It a 2030 part of house team and the idea is.
Speaker Change: As volumes continue to improve.
Speaker Change: Do we have the necessary equipment to keep up with the volume, especially at peak during the weekend. So.
Speaker Change: Opportunities that we see on the horizon.
Speaker Change: Been testing these turbo chefs as a replacement for <unk>.
Speaker Change: Our impingement, CTX, which are conveyer belt ovens, which are much slower.
Speaker Change: They are not.
Speaker Change: Not as reliable when they go down to a very expensive to repair the turbo shifts are much faster they make a much more consistent product the teams actually rave about them. So that's like an example, where potentially making that investment in that move would certainly create more capacity and deliver better food experience for the guest another one is prior capacity. So as we think about the triple Dipper and the.
Speaker Change: Christopher relaunch that we did 18 months ago, having so much success. It puts a lot of weight on what we call zone, one which is our frac capacity and so the question. There is do we need some bigger fryers in there or needing to add fryers certainly.
Speaker Change: If you add fryers and there is about an exhaust areas for the priors to be under so that's probably a little bit more of a longer term project and quite frankly, we're probably only have some issues and very very <unk>.
Speaker Change: High volume restaurants, right now and they typically just put more bodies on it to get through those peaks. So to the answer is yes. There is a lot of things. We can do there short term things on simplification that we're working on and then there's what we're calling this harder house 2030 project and when we have more details on that will make sure we share that with you Alex I'd also like to add another thing that we stay very.
Speaker Change: <unk> two is the labor model and we want to make sure that we're listening to the frontline and those teams to make sure that they have the labor they need to take care of those guests and we will continue to tweak that model and make sure. We have the right bodies in the right place and as we move on so that's another big one that we make sure that we're taking care of those guests so that they come back, especially with a step change in traffic.
Speaker Change: That's great and the labor levels, you're pretty good at this point, where they've stepped up too.
Speaker Change: Yes.
Speaker Change: He stepped up in the fourth quarter, and we continue to lean into that especially adding on incremental busters, where chili's a longtime ago eliminated the bus or position. When you. When you talk about whats the best practice in the restaurant industry is probably having a besser, especially with higher volumes and more traffic to make sure that we're keeping the restaurants clean and well maintained.
Speaker Change: That were turning those table. So that's when we're going to continue to lean into and as the volumes ramp up.
Speaker Change: Okay. Thanks.
Speaker Change: Thanks, Thank you.
Speaker Change: Your next question is from Katherine Griffin with Bank of America.
Katherine Griffin: Hi, Thank you.
Katherine Griffin: My first question is on the three for me.
Katherine Griffin: Lunch combo I think it replaces an existing promotion I think thats three for Ken Maggie you alluded a little bit to how this might be more of a mix driver.
Katherine Griffin: I'm curious if I should be thinking about three for me as kind of an extension of like earlier strategies to shed less profitable transactions or is this just kind of capitalizing on the momentum you had with three for me at dinner at lunch I'm, just trying to think about the balance of traffic and mix.
Katherine Griffin: In terms of great for me at lunch.
Speaker Change: Yes. So really this was just an evolution as we looked at how successful the three for me platform wise than we thought.
Speaker Change: Let's simplify the menu because we had a lot of one time items on that old lunch combo menu, let's align it a little bit more at the three for me, but let's lean into some more lunch favorite items on that menu. It has multiple tiers. So really it's been a win for US a win for the guest and a win for US as we simplify for operations, we still have that <unk>.
Speaker Change: Price at $2, 99, which our guests love and we have some more options for them. So it does drive a little bit more positive mix because the tiers are a little bit different.
Again more to come on that as we get through the second quarter, but we're really pleased with the with the initial launch yes.
Speaker Change: Just to build on that like the big ones that we see so far.
Speaker Change: Our operationally like it's lunch combos, the prior lunch combos, where a very small percentage of the business until business, but yet it had a lot of unique pantry skus and unique items that we'd have to train new team members on.
Speaker Change: We're very very small percentage of the mix it was less than most entrees that we have on the menu. This entire list of menu items. So just getting rid of all of that and then aligning.
Speaker Change: Every day items that we already make on the everyday menu has been a huge win for the restaurants as well as how we manage pantry SKU in inventory.
Speaker Change: The other big pieces of mix and so we're seeing a little bit of mix helped because in the old lunch combo menu everything was priced at $10 and the new lunch combo menu. It starts at 10 99, but then there is trade up options at 12, 90, 914, 90 916 99, so just having those options. Obviously, some guests are going to gravitate to either a bigger eat or something thats more premium so.
Speaker Change: <unk> seen some mix helped there.
Speaker Change: We'll continue to learn more about it there are some opportunities on it. So we are seeing people three people will come in in the order of the three for lunch and they don't all want chips and salsa and so how do we manage that and make sure that the servers.
Speaker Change: The right procedures to manage that either with telecom chips, and salsa or offering something else. So.
Speaker Change: Got some work to do on it but overall from a operational standpoint, and a guest standpoint, it's been pretty favorable because the guest sees more value in these bigger bundles and they've given us that feedback so more to come still very early in this.
Speaker Change: But it seems to be a pretty good move so far.
Speaker Change: Great. Thank you that's super helpful.
Speaker Change: And then the.
Speaker Change: Second question is two parts first can you.
Speaker Change: Remind me like if you've quantified the lift.
Speaker Change: Same store sales from re imaging, maybe like what Youre seeing now versus what you've seen historically and then.
Speaker Change: Just ask again about unit growth.
Speaker Change: I'd like to know like what would need to happen in order for Chili's unit growth to Reaccelerate is it more like macro driven more favorable build environment versus sort of the.
Speaker Change: The underlying momentum in the business as kind of the.
Speaker Change: So take care of that.
Speaker Change: Okay.
Speaker Change: I'll start with that so first of all we're not really re imaging in a big way yet so Kevin he was indicating that that's something we think we can ramp up in the future to re image our restaurants I don't have any returns to share historically, we did see.
Speaker Change: S. S sales lift when you do this but we think it's something that we want to continue to invest in the fleet.
Speaker Change: To continue with our relevant.
Speaker Change: And being culturally relevant moving forward. So that is more to come in the future Thats a future initiative that we want to lean into the second thing about the the unit count is we feel really good about where we are right now, but again, it's back to Kevin's point, then when we're looking at our capital allocation strategy. There's still a lot of dollars that we think we need to invest into the <unk>.
Speaker Change: <unk> fleet or the base business and we're getting a great return there so.
Speaker Change: We're going to continue to have slow and steady on Chili's and opened new units were very pleased with them and how they're performing well. We also mentioned that we may want to lean into marciano because much of those are $10 million boxes. There's only 50, Evan so theres a lot more white space, there as well and we're excited about the momentum that that brand is picking up so those are things we'll continue to.
Speaker Change: Work through as a management team on where we allocate those dollars that.
Speaker Change: But right now we're in.
Speaker Change: Not ramping up too much on the Chile side.
Speaker Change: Thank you.
Speaker Change: Youre welcome.
Speaker Change: Your next question for today is from Eric Gonzalez with Keybanc.
Eric Gonzalez: Hi, Thanks for the question and congrats on a really strong momentum and improved profitability. This quarter, it's really impressive in light of what some of your peers are saying about the difficulty of the operating environment.
Speaker Change: Absolutely excellent Mandujano, it's exciting to hear how you can take what you've done at Chili's inquired over to Adriano <unk> brand I think it really validates the strategy and reinforces that youre doing the right things for the long term health of the business. So.
Speaker Change: Question, there is on the pricing levels, they've been fairly elevated relative to peers. So can you discuss the strategy there and what your thoughts are perhaps moving more towards a traffic focus strategy versus the check growth we've seen in the past few quarters.
Yeah. So good morning, its Kevin so the way to think about it is the year that <unk> is in right now feels like year one of Chili's.
Speaker Change: Turnaround. So we did a lot of things to try to put the pieces in place. So we could start winning with.
The fundamentals of casual dining so we reduced a lot of the discounting that we're doing on the brand we caught up on some pricing that we had missed during COVID-19.
Speaker Change: You'll be able to reinvest in things like labor and food quality and the experience.
Speaker Change: We got rid of.
Speaker Change: Bunch of small mixing items that were creating a lot of complexity in the kitchen to be able to reinvest in the core four.
But that's what <unk> is going through right now so.
Speaker Change: There is some traffic, they're losing because of the reduction in discounting.
Speaker Change: We are going to lose a point of sales and traffic that we talked about on eliminating the $6 take home meals, but quite frankly, it is going to accelerate.
Speaker Change: Traffic over time and restaurant level margins as we start building a stronger customer base, that's more loyal to the brand versus a discount and then improve the food quality of the service and the atmosphere going to marciano. So the way I would think about it is there kind of in year, one of what Chili's turnaround was and that you would.
Speaker Change: We expect to start seeing improvements in traffic sometime in year two as the investments that we're putting in the business start taking hold in the innovation start bringing guests it.
Speaker Change: Great. Thank you.
Speaker Change: Your next question is from Jim Sanderson with Northcoast research.
Jim Sanderson: Hey, Thanks for the question and congratulations on a great quarter, just going back to trying to understand better the amazing turnaround at Chili's, It's taking place can you update us on how your household income demographics have changed since you first launched TV advertising I'm, just really wondering if you fundamentally shifted the consumer base too.
Jim Sanderson: With less price sensitive consumer.
Speaker Change: Well, we don't have we don't have that exact anecdotal data.
Speaker Change #100: The specific data yet to confirm that I will tell you when you talk to the restaurant teams. They tell you. They are seeing different demographics of guests and we're seeing the same thing now with Marciano is I was just with the team literally yesterday and the regional meetings here in Dallas.
Speaker Change: And Marciano is also saying they are starting to see that.
The guest demographic literally change in front of them and I think what we're seeing is we're not we're not as reliant on coupons to bring guests and those guests might have gone somewhere else, where they have a coupon and we're replacing those guests with guests that are coming because they're excited about the innovation or what they're seeing on television with the value.
Speaker Change: So it's very much more of an.
Speaker Change: Chile is a more <unk> strategies, you might hear that from a retailer everyday low price, where we have great value great service consistent food versus kind of the high low that I think we've used to be in our old strategy. So.
Speaker Change: I do think that creates a more resilient customer base over time, because they are choosing you for the right reasons versus something that can be replicated easily by a competitor.
Speaker Change #101: Okay and for the different demographics, you are seeing is that adjusting to where you're.
Speaker Change #102: Allocating funds for to where your marketing going forward, whether it be social media channels are advertising on traditional.
Speaker Change #101: Yes.
Speaker Change #103: Chili's is still for everyone. So we talked about that earlier on that when we look at the income demographics and where we're growing we're growing with literally every income demographic right now.
Speaker Change #103: And there's no reason to change our marketing mix right now we feel like the mix of TV that we have kind of our <unk> and then the groundwork that we have with social media continues to work so unless we see something that would tell us differently right now we're going to continue with the mix levels that we're at.
Speaker Change #104: Understood and just one last question on New unit development I think you've cited some pretty impressive results average weekly sales on some of the new stores opened.
Speaker Change #105: How does that benefit comp.
Speaker Change #106: Same store sales trend given it sounds to me as if you're replacing underperforming stores with strong performers is there any.
Speaker Change #106: Metric you would call out that would be a contributor to the strong sales performance.
Speaker Change #107: Well at new restaurants won't impact same store sales because you have to be opened 18 months before you get rolled into that number but what they are doing is I mean really the strategy is we're opening new restaurants, we're thrilled with how they are opening and that the sales volumes at the same time, we talked about I think on the last call that.
Speaker Change #107: Through Covid, we had not closed.
Closed any restaurants, we held everyone out until we kind of really wanted to see the turnaround.
Speaker Change #107: Chili's isn't isn't almost approaching a 50 year old brand. So theres. Some natural leases that ended bank. So we have been closing some of those underperformer. So.
Speaker Change #107: It could be a net neutral impact to revenue when we're closing a little bit more than we're opening so it's not really.
Speaker Change #107: Material to revenues, but it is going to be helpful to margins in the long term strategy to just continue to keep the brand relevant.
Speaker Change #108: Alright, Thank you I'll pass it on thank you.
Speaker Change #109: We have reached the end of our question and answer session and I would now like to turn the floor back to Ken Sanders for closing comments.
Ken Sanders: Thank you Holly that concludes our call for today, we appreciate everyone joining us and look forward to updating you on our second quarter results in January have a wonderful day.
Speaker Change #111: Thank you. This concludes today's conference call you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.