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The revival of trends last seen three decades ago is not just limited to hair scrunchies and baggy “dad jeans”. In the US, casual restaurant chains that American diners had all but abandoned are also making a comeback.
One such is Chili’s, a bar and grill chain that reached its cultural zenith in the 1990s with a seemingly ubiquitous “Baby Back Ribs” jingle. The shares of parent company Brinker International have warmed up of late, quadrupling over the past two years thanks to resurgent sales. Meanwhile, shares in the Cheesecake Factory, a chain known for expansive menus and generous portions, are up nearly 90 per cent. Olive Garden owner Darden Restaurants is up by a third.
Sit-down restaurants make for unlikely Wall Street winners. The sector has been convulsed by bankruptcies; Red Lobster, TGI Fridays, Ruby Tuesday and Hooters are among the big names that didn’t make it. Customers have defected to cheap fast-food chains such as McDonald’s and so-called fast-casual outlets — office lunch, basically — like Chipotle, Cava or Sweetgreen.
But as fast and fast-casual chains have raised prices, the ‘90s mob has spied a chance to hit back. Chili’s “3 for Me” combo deal gets diners a main, a drink and a side for less than a McDonald’s large-sized Big Mac value meal. Social media has helped: a video showing the stretchiness of Chili’s mozzarella sticks went viral.
The result: Chili’s same-store sales were up 24 per cent for the June quarter, the fifth straight quarter of double-digit growth. By contrast, Cava, a Mediterranean takeaway that pulled off a blockbuster stock market debut in 2023, managed just a tenth of that growth rate in its latest quarter, a sharp deceleration. Chipotle and Sweetgreen had it worse, with declining like-for-like sales.
Even after a blistering rally, Brinker shares trade at just 13 times forward earnings, less than half Chipotle’s multiple. That could reflect fears of a price war; McDonald’s has rolled out $5 meal deals, for example. But it seems miserly, given Brinker’s sales growth and operating margin are now back up to where they were in the mid-1990s, when the stock traded at 30 times earnings. That part of the retro revival for now remains elusive.
pan.yuk@ft.com
