- Chili’s is back, baby: Brinker International has been on a hot streak
- US Foods and Shake Shack issued preliminary results last month, and both report full Q4 numbers this week and next
- Overall, the consumer keeps spending, but winners and losers emerge
One of the most gangbuster earnings reports so far this season didn’t come from a flashy AI name or one of the mega-cap tech stars. No, it was from the owner of that humble family-eating establishment just down the street. Brinker International (NYSE: EAT) reported blowout Q2 2025 numbers.
The company that runs the Chili’s and Maggiano’s brands recorded non-GAAP EPS of $2.80 in the quarter ending December 25, 2024, which soared past Wall Street’s consensus estimate. Revenue of $1.35 billion was a +26% year-on-year comparison, also topping expectations.1
Digging into the report, its Chili’s brand posted a 31.4% annual sales jump, which is almost hard to fathom for a family-friendly restaurant.2 Shares soared by 16.3% in the session that followed, and EAT is now scarfing up the competition’s lunch, it seems. The stock is up more than 300% from the start of 2024.
Improved Restaurant Spending Trends
But that’s just one company, one story. Broader restaurant industry trends are not as sanguine. According to BofA Global Research and Bloomberg Second Measure credit and debit card data, US restaurant spending ended 2024 on a whimper with a –3.6% annual slump. January appears a bit better at –0.9%, but that includes a positive seasonal shift around the New Year’s holiday.3
The BofA numbers point to strength in full-service restaurants, such as those operated by Brinker, but softer sales among some fast-casual chains. And while we don’t have data specific to breakfast joints, the increasing cost of eggs, coffee, and oranges could be squeezing your favorite diner.
The Right Recipe Mixes in Tech, Automation, and a Customer-First Focus
For Brinker, the Chili’s brand was likely able to achieve such strong same-restaurant sales thanks to a myriad of factors. CEO Kevin Hochman noted operational improvements on the conference call, including simplified menus, enhanced food quality, and strategic marketing campaigns like the “Triple Dipper” appetizer initiative (sounds scrumptious).4 The management team also called out successful automation investments and kitchen technology, such as TurboChef ovens, which helped to streamline operations and improve guest experiences. So, EAT’s excellent quarter can be partly attributed to tech.
Trends in the restaurant industry tell us a lot about the consumer and their willingness to spend on discretionary categories. Data from OpenTable suggests that there may be a modest acceleration in away-from-home food spending. As of early February, the weekly change in seated diners from online reservations was up 5% from a year earlier, and up from –8% in mid-January.5
High Steaks: Fourth-Quarter Results on the Menu
On the earnings docket, we’ll hear from a slew of restaurant and food companies in the next few weeks. The likes of McDonald’s (NYSE: MCD), Starbucks (SBUX), Chipotle (NYSE: CMG), and Yum! Brands (YUM) have already posted results, but quarterly figures from US Foods (USFD) Wendy’s (WEN), Cheesecake Factory (CAKE), Shake Shack (SHAK), Texas Roadhouse (TXRH), Domino’s (DPZ), Bloomin Brands (BLMN), Cracker Barrel (CBRL), Papa Johns (PZZA), and Cava (CAVA) are all due out by early March.
US Foods: An Under-the-Radar Recent Winner
On that list, USFD reported preliminary earnings results back on January 13. The $17 billion market cap Food Distributors industry firm, within the Consumer Staples sector, reaffirmed its fiscal year 2024 guidance. Supporting the restaurant industry, US Foods partners with approximately 250,000 restaurant locations and food service operators. Ahead of its presentation at the January ICR Conference, the company guided to annual sales of $37.7-$38.0 billion, about in-line with consensus, and adjusted diluted EPS in the range of $3.05-$3.15 versus $3.12 consensus.6
That would be a mid-single-digit top-line growth rate, not especially impressive on its own, but USFD shares have gone on a bullish binge, up 40% in the six months ending February 5. The rally comes despite tariff fears and a strong US dollar. Looking ahead, US Foods has a confirmed Q4 2024 earnings date of Thursday, February 13 BMO with a conference call at 9 a.m. ET. After affirming guidance earlier this month within its preliminary report, this high-momentum stock could be one to watch.
Burgers, Fries, Shakes…and Profits?
While USFD may fly under investors’ radars, Shake Shack has become a household name in certain areas of the country. With just a $5 billion market cap, the New York-based Consumer Discretionary stock, like EAT and USFD, has outperformed the S&P 500 since the beginning of 2024. SHAK had negative operating earnings from 2020 through 2022, but EPS growth has improved markedly; the street expects a more than doubling of its annual per-share earnings7 when it issues results on Thursday, February 20 BMO. On January 13, also ahead of the ICR Conference, the company served up a 2024 business update and refreshed long-term targets.
SHAK’s preliminary numbers pointed to same-store (I mean, Shack) sales growth of 4.3% in Q4 with total revenue rising by 14.8%. Margins were particularly impressive with the fast-casual chain; the preliminary noted an expansion of almost 300 basis points compared to the previous year while adjusted EBITDA grew 48%. Shake Shack is staking claims across the country with 43 new Shacks opened in FY 2024, and it aims to have 1500 restaurants operating “over time.”8
Despite beefy growth visions, SHAK shares have shaken the bulls’ psyche lately. The stock is down from its all-time high just shy of $140 last December to between $113 and $125 ahead of its full Q4 report next week.
The Bottom Line
The restaurant space has been a volatile arena for investors in the last several years. Post-COVID spending was a boon, but then high inflation, including soaring wage growth in the services sector, was tough on operators. Today, with steadier cost pressures, new challenges emerge as competition heats up in the kitchen. AI and tech have been helpful for recent winners, while the constant threat of tariffs looms. We’ll be able to link the narratives as more chains report over the weeks ahead.
Sources:
1 Brinker Non-GAAP EPS of $2.80 beats by $0.94, revenue of $1.35B beats by $100M, Seeking Alpha, Deepa Sarvaiya, January 29, 2025, https://seekingalpha.com
2 BRINKER INTERNATIONAL REPORTS SECOND QUARTER OF FISCAL 2025 RESULTS AND UPDATES FISCAL 2025 GUIDANCE, Brinker International, January 29, 2025, https://investors.brinker.com
3 BofA Global Research, BofA Securities, February 4, 2025, https://business.bofa.com
4 ‘Gen Z Is Obsessed’: Chili’s Sales Are Skyrocketing Thanks to the Triple Dipper and Turbo Chefs, Entrepreneur, Erin David, January 31, 2025, https://www.entrepreneur.com
5 The restaurant industry, by the numbers, OpenTable, February 4, 2025, https://www.opentable.com
6 US Foods Reaffirms Fiscal Year 2024 Guidance, US Foods, January 13, 2025, https://ir.usfoods.com
7 Shake Shack Inc. (SHAK), YahooFinance, February 5, 2025, https://finance.yahoo.com
8 Shake Shack Provides Fourth Quarter 2024 Business Update and Long-Term Targets, Shake Shack, January 13, 2025, https://investor.shakeshack.com
Twitter: @ChristineLShort
The author may hold positions in mentioned securities. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
