Chili's joins the casual-dining blame game

Its parent company claims the higher payroll tax and gas prices are responsible for slumping sales -- just like Red Lobster and Olive Garden.

By Jason Notte Feb 28, 2013 2:53PM
People walk under a sign for Chili's Grill & Bar on 16th Street in downtown Denver, Colorado (© RJ Sangosti/The Denver Post via Getty Images)We have met the enemy, and he is not us.


Because the Greek chorus of casual-dining establishments shrieking blame for slumping sales apparently wasn't loud enough, Chili's and parent company Brinker International (EAT) have joined the fray. On Wednesday, the restaurant and its ownership group cut expectations for 2013 like a serrated knife hacking fat from a parmesan-crusted steak. The company now says earnings per share will be on the low end of the $2.30-to-$2.45 range and that sales would grow at a near-stagnant 1% pace.

Why? Brinker fingered the lapsed Social Security payroll tax cut, rising gas prices and delayed federal tax refunds for its dour quarterly outlook.


If all of this sounds oddly familiar, it's because Olive Garden and Red Lobster parent company Darden International (DRI) made a similar claim while revising its annual forecast last week. Like Darden, however, Chili's and Brinker have a lot more dragging down their sales than just current events.


For much of of 2012, sales at Chili's and Brinker's second chain, Maggiano's Little Italy, were up 2.7% from 2011, and the company's share price increased 50%. Unfortunately for Chili's, 2-for-$20 meal deals contributed the biggest portion of that growth even as industry experts warned such pricing was unsustainable.


Now, Brinker says, sales at Chili's are down 2.2% for the third quarter and Maggiano's sales are flat. It's an industrywide problem for casual-dining establishments, whose collective sales have fallen each quarter since spring of 2010 as they increasingly lose customers ages 18 through 47, according to NPD Group.


The problem is especially acute for chains like Chili's, where the cost of meals has been rising and meal deals cut off a large chunk of profits. The cost of dining out climbed 2.7% over the last year, according to the Consumer Price Index. That's ahead of the 2.2% overall rate of inflation but still far less than customers absorb once a chain's sale prices fade away. Customer who pay $10 for a promotional deal will pay 20% to 40% more when the price rises to $12 or $14 a few months later.


Even Wal-Mart (WMT) used the same excuse as Brinker to explain away its soft performance in January -- despite competitors like Target (TGT), Macy's (M) and TJX (TJX) reporting rising sales during the same month. But the casual-dining industry's woes predate the items on Brinker's current list of problems.


It's not about the portion size, and it's not even about the product's quality. It's about the value. If diners are willing to lap up your meals at $10 but turn up their noses when they're $2 to $4 more, no drop in payroll taxes or gas prices will make them change their minds.


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149Comments
Feb 28, 2013 4:08PM
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The way the economy is heading, the only meals we will be eaten will be at the Costco restaurant:

 

Hot Dog and Coke $1.50

Pizza $1.99

 

My wife and I both went from working overtime...to no overtime...to part time...to doing what ever it takes to pay bills (mostly small contract work) and not knowing how we will make it through the year. Can't speak for anyone else, but we won't be eating at Chili's anytime soon.

 

We see no strength in the economy. We see no strenght in our client's business.

Feb 28, 2013 3:40PM
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If you bright people at MSN Money can't figure this out it is because you live in the same distorted bubble that politicians live in where you don't worry about paying your bill because someone else is paying them for them. Wake up people our economy is in the tank and the American public is right there also! People can increase consumer spending because if they have gotten a raise from their employer it was 1-2% while the cost of most of the items we rely on have gone up 30,40,50%
If I look back over the last 10 years my income is the same , while everything I buy has gone sky high!!!! Gas 10 years ago was what $1.25 now almost $4.00 a gal. of milk 10 years ago $1.89 now $4.00 do you see the pattern ? Wake up people , you are going to see vast changes in these companies and you can think Obama and the rest of the fucxxking politicians for this and I fear it is only the beginning...why do you think Obama want to disarm you???  
Feb 28, 2013 4:10PM
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Seems obvious - if people can't find jobs, they don't eat out as often.....
Feb 28, 2013 3:17PM
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What is the problem?....... Consumer Spending is UP!!! ........... of course that is just because gas, groceries, clothes.. .. etc. etc. is more expensive......... not because we are buying more products... BUY INTO THE SCAM.......... come on man!
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This administration sucks and Obama blows !
Feb 28, 2013 4:23PM
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Look out folks, a huge economic downturn is coming.  I hope y'all are ready!  I am.
Feb 28, 2013 4:21PM
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obamas killing buisness in america  WAKE UP AMERICA  hes got a socialist agenda
Feb 28, 2013 3:52PM
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No. It couldn't have anything to do with the economy and therefore this President!  My god, do these so-called journalists have no integrity? If you de-facto apply blame to this White House, you are either attacked or made fun of as in this article.
This author is apparently an expert on restaurants, where-as those whom actually run them apparently have no clue...yeah right.

Feb 28, 2013 4:24PM
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obams economy nobody else to blame     OBAMAS SOCIALIST AGENDA KILL AMERICA
Feb 28, 2013 4:24PM
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47% DONT EAT THERE THEY DONT EXCEPT   EBT CARDS
Feb 28, 2013 4:26PM
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Would somebody please inform our lame stream media that the reason everything sucks right now is actually their fault. They are the worthless POS idiots that have lied and covered up and gotten this POS president and his band of crooks in office and they have just about completed their mission of destroying the USA. So, FU MSN and the likes for Fing us in the a$$ and stabbing us in the backs.
Feb 28, 2013 3:27PM
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Chili's your food kind of sucks. How is that not your fault? 
Feb 28, 2013 4:15PM
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Chili's isn't new anymore. We've all been there and how often are we going to go back?
When it comes to restaurants, the lion's share of the market goes to the new ones and the established ones that managed to rise above the competition.  There have to be at least twenty restaurants in the same price and product category as Chili's in my town and I haven't been to all of them, so why should I go back to Chili's instead of trying one I haven't been to or better yet a good local non-chain place?

The price of ultimate success for chain places is ubiquity. They're everywhere and not all that different from their competition. I can go to a Chili's in any large town in America and it's the same menu and environment where ever. Been there and done that. I like trying something new or at least something that I can't get anywhere.
Feb 28, 2013 3:32PM
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We just had a MAJOR INCREASE in GDP, 0.1%, HA,HA,HA,!!!!  Thanks Marion Barry Maobama!!!!
Feb 28, 2013 4:34PM
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Don't yo know it's not called Global warming anymore ?
It's now called
 C L  I M A T E   C H A N GE  !!
This way, if it gets super hot or super cold we can be 100% correct !

Feb 28, 2013 4:32PM
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Who cares about .1 % growth or 6 trillion in new debt
WE GOTZ FREE CONDOMS !!!!

Feb 28, 2013 5:06PM
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I don't go to Chili's anyway. The last 3 times I went there, I had horrible experiences. Terrible & rude service, inedible food, and filthy floors. So gripe all you want Chili's. Maybe your loss in business is not related to higher payroll taxes & gas prices.
Feb 28, 2013 4:35PM
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They can call it whatever they like? I call it what it is.. A big load of B.S.

 

Feb 28, 2013 3:38PM
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[Sung to the tune of the baby back ribs jingle]

 

I want my Obama tax Obama tax Obama tax Obama tax Obama tax Obama tax...hikes,  I want my Obama tax Obama tax Obama tax Obama tax Obama tax Obama tax...hikes, I want my Obama tax Obama tax Obama tax Obama tax Obama tax Obama tax...hikes...Obama...taaaaaaax hiiiiiiiiiikes!  Barbecue sauce!

Feb 28, 2013 3:49PM
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GREAT CHIPS AND SALSA--EVERYTHING ELSE--NO BUENO.

 

POO-POO CA-CA.

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