CHUY - Earnings call transcript Q2 2018

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Operator

Good day, everyone, and welcome to the Chuy's Holdings' Second Quarter 2018 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. On today's call, we have Steve Hislop, President and Chief Executive Officer; and Jon Howie, Vice President and Chief Financial Officer of Chuy's Holdings, Inc. At this time, I'll turn the conference over to Mr. Howie. ahead. go Please

Jon Howie

the and have Operator, release. everyone. now, website, By can Thank to good our should in our on access be earnings section. second everyone also you, found afternoon, Investors quarter It XXXX

results These you materially remarks, reliance turn not Before remind detailed operating are need the and out performance, guarantees financial statements conditions. SEC discussions to filings will cause of to could everyone of we of of actual These on statements. recent Steve. of results and therefore, the more our to include of a that future I differ future forward-looking to we should part discussion expect. all forward-looking We our that refer like for subject review undue our numerous begin call With that the what I'd today to uncertainties our them. not to formal way, you put that statements also over risks and from are risks impact could

Steven Hislop

you, to joining call on the everyone you Jon, and us today. for Thank thank

begin high-level overview of progress we've our Let's made to with various initiatives. results, and our quarterly a the

revenue restaurant second fiscal grew a the in including comparable quarter, For calendar basis. increase sales X% a both on XX.X%, and

We to continue the increasing during to due experience restaurant-level quarter, labor largely margin pressure costs.

and a pressure. a value However, and remain customers delivering share care we our unique compared of that by have all, earnings at upbeat focused which Overall, last in tremendous food on made-from-scratch we to $X.XX moment, that in can taking a atmosphere. we $X.XX worked year. of believe offset in high-quality, of drink discuss handful per with of All a we I'll help some initiatives diluted reported

update. improve to several brief working However, know, to strengthen have initiatives, we our of been you provide strategic and on a and like our profitability, I'd many brand as further

but entire As continued not industry. only I us points, to costs pressure for the noted, labor be

been has efficiency of way. As a our non-guest-facing a on focus in labor maximizing result, much our

labor sales management completed, this assist projection been One key our productivity. have labor our Once our of new our with initiatives help believe tool of optimizing new platform enhance will and further POS a in us system. the integration we

functional the we're Media While by speed Kelly end Scott bumps we to On by a I'm Marketing few second have as the this full have pleased we quarter, fully Partner. [indiscernible] announce delayed a rollout of quarter. be to that our slightly pushed front, the marketing new expect that to technology Madison selected

the base KSM In addition hands-on giving to across broad its and here success clients, has of an our consumer in her Austin, history culture. office impressive unique of history a of brand them

want office is Chicago main one focus markets on new awareness. of to their in where our Additionally, in we brand

only partnership just and planning. our have We begun

opportunities and have to the excited sessions initial about message. our very awareness brand me Our improve

with to Lastly, through technology, system make our in partnership continue new we ordering Olo. progress regard to online designing with our

test Our easier our make goal and order conveniently guests to been early our is positive. for our feedback from to it had food,

expect quarter. or further the September. into all stores in test Dallas If goes X we store fourth by plans expand we in Austin, the markets with actually in in are of well, here end initial early approximately -- We Olo and to the full-system-wide southeast, X will additional on Austin, rollout in would XX a

stepping to loyalty time stone we program, this for are mentioned, our make our designed platform so taking future will online properly. sure is everything we As ordering a be

now me on development. you update our Let

restaurants. in Chuy's quarter, opened three During each and Colorado, Village, we One Greenwood Lakewood, New Tampa, the Colorado, in new second Florida.

Kendall, X Florida. the additional restaurant subsequent the end quarter, second opened Additionally, of to in we

XXXX job excellent restaurants are performance new Chuy's pleased with in and we restaurant, continues do instilling our the culture to that an team of Our of to our date.

refined like have in our now I'd of we to now full to the a third more that, turn CFO, includes XX the which for development X With between results. XXXX, second XXXX, review to to our detailed new quarter. quarter targets Howie, for For X the restaurants, be year over Jon our call

Jon Howie

shift increased restaurants for Revenues by X, X,XXX Steve. XX.X% during year. last Thanks, to total, million year-over-year release of XXXX is XXX to quarter for quarter calendar refer to second inclusion we primarily to of the of breakdown additional and produced incremental fiscal operating had approximately earnings an the quarter weeks due a second during last Similar of X subsequent by our the date. XXXX, weeks second from XXXX. the of $XX.X XXrd our million last calendar a second to driven XX comparison year's XXXX, quarter. detailed $XXX.X July ended the the fiscal quarter, second there to in the in week revenue in of In week operating new quarter opened Please

result increased pricing the conditions, impact the basis customers. partially Effective results period second first was of the driven approximately as in due X.X% decrease at XXXX, The quarter second in comparable the of a quarter XX-week Comparable X.X%. negative restaurant by the for increase the For There XXXX. base to the basis average offset X, July by XX X% of comparable fiscal XX comparable sales our XX during to basis quarter of included both is in XXXX. quarter, compared of offset XXXX. points Easter unfavorable check, ended restaurants average primarily second and falling in weather end gain increase X.X% by for sales calendar were a restaurant quarter point a partially as in weekly

of selected produce decreased to helped largely percentage Cost a to XX.X%, a items. expense of prices. by to XX line revenue, as favorable points basis sell, discussion Turning

The to they expectations flat the inflation the year, to Labor bringing the store While year new XXXX, our we spike deflation to higher have recently X.X%, approximately our in food attributable approximately in of cost revenue, of inflation restaurant for costs, increase wildcard slight in of second of rate pricing, increased still to half labor hourly percentage and a X%. full comparable seen out efficiencies. back half we newer basis and expect wage as remain markets, year-over-year was XXX tip XX.X%. our points of commodity a

current X% X.X% increased outlook, rent to expect the basis higher $X.X benefits due steady held and continue labor opened of XX.X%. XX management costs, now extended the bonuses. X%. approximately compared and X%, our percentage driven Occupancy certain expense at rental salaries costs, to a we be to second revenue, of existing expectation primarily previous administrative of primarily $X.X million to of lease we to newly the by certain percentage growth revenue, performance terms Given to General our inflation and approximately to quarter, points million expand operating increased support as in our Restaurant restaurants, store at larger as straight-line higher expenses markets from and to into higher restaurants. as

of percentage decreased XX revenue, a to year-over-year As G&A basis X.X%. points by slightly

tax share rate income net Our resulting the in income. was quarter, an reduced $X.XX during XX% per second in extra to

XXXX $XX.X in a compared million, We the sheet, on million, per diluted diluted we with for balance XX% million quarter tax In currently debt. for have period. year-ago the of the rate $X.X year the quarter to and share, $X.XX cash share $X.XX no ended We $X.X or to expect income the our of per second now be net range. to was summary, XX% or in

outlook. our Now turning to We're guidance. adjusting XXXX

$X.XX We pleased sales new restaurants. several reflect generally remaining of share both in well $X.XX per restaurants, $X.XX of XXXX $X.XX we as previous increased to delay our new a in XXXX earnings a diluted $X.XX. and extra While our revised per compares labor share to net of in our as are approximately excluding with between income opening result to diluted $X.XX, expectation of the now range adjusted share existing trends, and to $X.XX, or the costs XXXX diluted largely as per date week XXXX. expect This compared after

the on expenses to assumptions: million approximately a We continue to updated now Restaurant to sales growth expected compared are preopening million based million is to $X.X to guidance comparable restaurant X% on $X.X of expect million $X.X $X.X fiscal base. Our previously. approximately be XX-week following

We compared expectation of expect a XX%. million now $XX.X expenses effective of tax We and rate between continue to G&A an approximately to XX% previous XX% expect to to $XX.X million. XX%

annual Chuy's restaurants new weighted to diluted we XX.X average shares. outstanding noted, shares to XX.X year. as X model million And of to XX we open this million continue now We expect to

$XX our improvement our expenditures, wrap of capital allowances, over and between narrowed that, of Lastly, call million back to turn With has million $XX to I'll million. $XX tenant net are which to Steve up. $XX to previous expectation be projected the from million,

Steven Hislop

brand our help near-term we us Thanks, strong, fundamentals are our industry Jon. of believe We in out we've confident the remain laid business a weather will and and challenges long run. that strengthen the initiatives the

in for their to broadening happy them importantly, of work an More and integral With single thank part are to that, continue our success appeal, brand Thank would I day. our any earning be answer employees to we you. like our to questions. dollars dedication every and hard

Operator

Tarantino from We'll David hear with first Instructions]. Baird. [Operator

David Tarantino

you questions openings. being A guidance. the on of one I couple one the labor two being and the updated delays mentioned Jon, guess, factors, inflation, other

inflation hitting But what that, opening labor delays, with well the I explain happened how is could So the I P&L? understood. think is that of the second and part, part think the you

Jon Howie

delayed is again, XX weeks delays Well, in the about to X openings.

that's going. That's kind to So to from a million. that's sales where close standpoint, $X of $XXX,XXX

Steven Hislop

area. Florida the in specifically And

David Tarantino

is to margins, with Got profit low it. for my stores a is fairly impression is come that big that -- the so process And these guess I year? this impact? all that, material

Jon Howie

labor. as not I right. as absolutely the significant mean, It's you're

David Tarantino

the than guidance, same-store in sales Got you've does second reported year-to-date. of imply a it. it half year question, the on then the And trends second what better

far confidence a what one, guess, of guess, X% basis. degree full quarter? getting comment update an I could third year in in give seeing on number you on the your of you're us so I to And on that fiscal So

Steven Hislop

Yes, David. Steve. This is

on hurricanes quarter. third as far lapping, third Houston so end fourth you the very is, the little in are the be in far, beginning line, quarter, bit number, we're we've we definitely quarter, the that to going of to hurricanes in quarter, And at markets. the also Florida of into told year-to-date lapping, second the similar market. the optimistic is we And the the the trend a while more are the our As

Jon Howie

Plus we partner. -- have our with new

Steven Hislop

Yes...

Jon Howie

fourth of quarter, in fourth part the upside quarter the half have -- probably Right. And starting last some we'll of out there. half significant second or back

David Tarantino

Got it.

sounds you're planning other what a standpoint? you'll in half. up second be have side. on is you I advertising that step from on the Any color The marketing like question doing the to It think

Steven Hislop

digital a met in definitely we'll is media and be presence. We've X we're immersion to them social times. with media our in at main And looking presence. right to now, also, planning our thing the stages, stages. We're going X Yes. introduce different But continuing

that, initiatives which we'll are major And over radio advertising You the more. will is cable for be initiatives. markets. mainstream this second little the some for repeat there. of talk value year, fourth we'll -- a hitting the obviously, new half then at the second defining existing midway our our of obviously, in remiss years and probably bit probably around talking of the been TV targeted markets, really these something possibly, up a And awareness visits, holiday on want see Not we'll -- But to some about X time, always even advertising, we've would you're half is we our whole talk quarter's few year. and really about some bit I focus through little when looking constantly differences. of menu think, our out that start in The overall the at last our the

Operator

Jefferies. Our next question comes with Barish from Andy

Andrew Barish

recall differences, just out or negative. traffic? with component seems general, weeks of I seeing On in marketplace, of consumer any were you some and and the wind finishing where they Are a in volatility the the traffic flattening some quarter monthly up comp, there things parts like out little geographically,

Jon Howie

little little Texas same, Houston outside Andy. been little It's of -- still stronger seeing weaker. Texas, of in traffic stronger a an really than We're is a a the issue -- kind Texas. slower hurricanes But the bit back think little I -- than rest little than rest. a from still it's the stronger the Texas is bit, still of don't a again, yet.

Andrew Barish

side that component guess, of like the Colorado, I or numbers, the but does does of higher you is start kind markets, much labor Illinois. When Florida, priced the how Okay. us cost -- or labor that And when into normalized kind through give then through numbers? mix factoring markets, higher some guess, inflation sense the on labor of understanding wage lap of, you to of the a can inflation? as move also I the things, into And

Jon Howie

you're on a of the inflation in number base. those is that's I comparable comparable A great the you, are store gave stores rate Andy, that Well, question. stores. Because lot that mention the

the those, that including X.X, weighted about at average, increased overall So you if look it's X%. actually

start comp base. focusing So our labor in is generally, about on the our stores, those next the on bit. and But going one it's too, a little first in quarter down year, focusing bringing will of new in to start initiatives, initiatives, time seeing you'll over, the rolling of line the those that's

Andrew Barish

there Okay. And the from that 'XX guide? something unique expect to here that your then going or is original finally in something just that's rate is tax on lower, creep you have continue, down

Jon Howie

credits all want significant on say couple a I trial Well, but and a to more it's of of a effective those -- decrease, the there's One, the of don't error, overall impact rate. with tax things. have new kind

stock changes rate a well items those run impact affect that of remember, have more it in and if so as and given expecting so -- through and common the to, we're there. the now, we your of that expense, than change just a And tax really in treated more through of those, down you how of lot used back few have up lot taxable, the year. half run of as a the discrete And it's the

Operator

Next, hear from Raymond Vaccaro James. with we'll Brian

Brian Vaccaro

Jon, I up second that quarter the just said back wanted think, to on basis was the you points in circle comps. quarter. XX mix I

quarters? do over next And to sustain expect the that. that few drove what curious Just you

Jon Howie

driving, seeing. price that that. of maybe bit more some is that our a And little of we're a again, ultimately, markets we on now what store the did think had that we After store it of stores. was lot in overall pricing those that openings mix X we increase, in Tier saw A the than, some with did based we've -- I mix.

that a is The few well. as other thing we're driving attachment in rates more seeing drink that's

Brian Vaccaro

it new to Okay. Now through after XXXX we're imagine could a latest I when moderating is shift the what be to If appropriate might bit, your sluggish you're growth? pipeline. that Steve, I given the well gears into 'XX, unit reaccelerate on growth. midway environment, thinking

point? you're the approaching and So how any color on this XXXX beyond at

Steven Hislop

up. -- told always that's that, it everybody might a I'm group if my tourist I I here, the out they guidance bit to customer think And the Yes. yet, I day, And in mentality, customer their still end were be At the if now. us. XX. I've originally of for X right were gave little that decelerate is said not counts aren't if driver here count we might to up, up it. accelerated. And the

probably That's what year. And how that I've next looking the same I'm year to I've so And now. approach, right had and this done. at that's

Operator

Stephens, come will question Will Inc. Slabaugh next with Our from

Hugh Gooding

and This your quarter. us And of of how Will sales in newer for start is give that's I mix off-premise during growth afternoon. to business, actually Hugh as faring could markets? on you wanted some asking some this color on the if more a with the

Steven Hislop

about XX%. XX.X% on actually in for excited We're about that. company-wide We're up off-premise. It's about quarter Yes. the our

basis sorry, delivery. pretty XX% the I'm the on stores But that's XX%. have basis. said it's we excited And on XX.X% So what about an -- our about third-party we've -- roughly Company-wide, is that always have up of comp comp XX.X%.

the last of year, and at three the earlier do end we've tests first the in year, As markets. catering mentioned to quarter, we last have that's continuing

XXX for think markets, I quarter, areas. it of I'd was contributed probably in $XXX,XXX it brought the second the in volume. those first X it reported I roughly in in about quarter, worth say, those

in looking year, X catering the upcoming be adding will market, one be vans D.C. Atlanta this other at two We our in be the market. more will will

over initially XX% We've that pleased, growing not it's And -- increase, very double-digit going the excited we're there. the we're what So on. though. with been been -- years, X a X consistently growing. a last it's But about we've sales of again, at doing in and rate we're we're

it. excited about we're So

Hugh Gooding

rendered to comp of And back quarter. then pricing the X.X% the going in that and kind the you

pretty the that pricing changing of environment is that Just for looking the commodity at level And expect year, the future the look pricing actions? to can remainder we of you're you're continue? to favorable that given way expecting

Jon Howie

Well, the done only second that's we X and of a each year, period at increase the price take year. beginning of

talking be our during of taking cost was expect that I we price deflation half, that pricing, anymore some the going the of And in about won't So the in rest you earlier. year. back the our X, can But X.X sales. because yes, to mix we're expecting X, that for of year,

Operator

Stifel. O'Cull We'll move to with Chris now

Christopher O'Cull

change percentage quarter? year-over-year after surprised first a Jon, the during I quarter. to the sales you're you expecting the improve labor as in believe, costs of What second

Jon Howie

think, -- been that quarter, remember that I X. Well, actually, said it that, on call, you up if above slightly after first I

yes, getting So -- quarter X, yes, inflation or from were we're the in But those at were experiencing minimum X -- wage it's because that. standpoint. Chris, competition, But quarter. under mean, this I fourth competition just little have we the first in not above we a point. a all wage that the But period really in it's markets the

Christopher O'Cull

the just drag new just was due what quarter you're primarily it consistent was and costs on greater the expecting to inflation? So wage labor -- efficiency with store during

Steven Hislop

have our it bit of bring the those has Chris, been this long taken currently, a Colorado. -- good it's pretty but as is Steve. in too I down outside, than specifically will we little stores. little streamline us longer ramped to existing bit stores plan tell you a to And a

Jon Howie

and wage the [indiscernible]... inflation inefficiency expect related of rest to that kind maybe XX% you're XX%, -- that we probably the those part about talking of of to the And of is XX%

Steven Hislop

the to quicker step-down. have on we'd be And

Jon Howie

be... we Yes. And will we are. And

Christopher O'Cull

rolled of the then, you the And rewarded gap? plan do once narrowing helpful. is out, kind A new general plan, bonus tool that That's versus so they're T labor to manager's Steve, alter for Okay.

Steven Hislop

projection Chris, don't key income. the controllable then, and think a everybody all done, total that's I what front that tool's obviously, be, is us key Well, to it house I like volume report, highlight outside stores. far going values it's the one is, to prospect and I segment, spreads. their thing do just When productivity looking budgeting we I line, a we're dangerous. down prospect, as from number said stores, it's the window an the of mean XXX% to to the as like is, and a and bonus labor all that's going basically it's of having volume But stores thing, narrow to that say, the exceptional for productivity to anybody really is the the have. and kitchen this that, their what store that do sales have we The all for going sales

it an reporting So of be thing. more will exception

gives you, is that it when -- punch The shift up, the though, second -- And some when incremental will which in beginning enforcement be small, punch -- ending schedule they enforcement. they sounds and but a of piece that it and out. add Schedule can there basically, also. maybe means, benefits

Christopher O'Cull

And but the million year? guidance some back closer in a new lastly, year-over-year of to planning $X the $X -- the in back year-over-year Jon, the has guys your projects year, for half G&A implies, it's Okay. of half you to been going million Are up the about half. then first be

Jon Howie

No.

if that, paid we was last bonus I think on X a the of Chris, you Because bonus takedown last performance the year. bonus remember, of year. lot the

Christopher O'Cull

you. Got

adjust year? So an the accrual -- to lapping see we adjustment last should you're

Jon Howie

Correct.

Operator

Wedbush [Operator Nick go Instructions]. Securities. to with Setyan next We'll

Nerses Setyan

than stay transaction about think can see next we if this year? the number lower we a additions additions of year, next the actually When year unit trend negative,

Steven Hislop

very say, year. similar looking I'd this to it's

Nerses Setyan

market, is new or all backfill? to going we it Are

Steven Hislop

-- backfill. backfill. be be will then We'll have we'll of have those all in It few backfill. and All some in Texas, all will

Nerses Setyan

next Jon? as of see labor more a actually higher we the And little we kind we pricing, go into can inflation, as see bit year,

Jon Howie

I to would I no. say mean, be there, but a we careful want do We comparison.

did sure a be make we is. X, as of We where Denver, currently the speak little room is in gap I thing just increases. the competitive there We on that in much in did tiers, to recent the a menu. those the that labor to too biggest study but pricing, have had still there, Tier our in seeing X the some and price wouldn't think we'll Our they after would probably it where that as is, gap other. much are Tier and the I not we competition in labor like depending specific in

Nerses Setyan

were Jon? of run just then that number, I think I what's state, CapEx steady to lastly, if CapEx rate, And like kind about maintenance mean, just

Jon Howie

remodels it year. XX,XXX budget in new -- our lot mean, out averages have I to we offices, we But into XX,XXX taking then that in the those Well, because X X store do with a of we addition year. a and about expansion it, a to

Operator

We'll move with to Andrew BMO. now Strelzik

Andrew Strelzik

couple me. A from

I make one first I'm sure to margin The just to want want I side. guidance, -- the on understand on the understanding

would change You're that to pointing I you labor the that be seems out you the called commodities. with reduction guidance? base. that but pressures really you're the have by seeing so noncomp is for in the of to the right, the guidance kind like comp numbers offset the recognized which the on I it units If respect in labor, are It that

Jon Howie

Yes.

the forecast, to was adjusted XX our basis cost we labor or saying a to labor X were still projected up, on XX sales months. that higher sales, to what rate little we basis Currently, points, XX basis probably what that's get or it's that points. But by running probably it's think was earlier. X higher XX, this XX by yes, trying need under projecting we're about months, cost And down we and was were X XX we or The than that about XX little then was down quicker those. probably stores, still to noncomp points probably XX, than XX get that. -- I and so of what a quarter run down of

it as been packaging up That's area. higher, that that to-go as good is which thing. believe well year, we we But labor running XX, the adjusting in not, or the is a continue a in that's bigger a to on on percentage sales the of strictly increase than kind just in and of percentage because of overall to-go. That's sales of increased about kind changed packaging impact to-go op basis at -- the the still there, be a increase or when because of XX end the a a impact up in increase little up sales. we're points expense. of basis, as So And bigger

Andrew Strelzik

And do Okay. be potential labor actually the on then realize have your maybe there's any in That's could helpful. or the assumed that that? rolling? tool, benefits offset you get delay of a a when you actually you guidance fully that Or once

Jon Howie

We will don't once currently. in, still in we be, tool take that be factored -- a say, But some like training it get I will will as on it it well. place, have that tool

early that training then So -- fourth going the end the be quarter. of, get we'll up third here, And on quarter, have hopefully, and third fully quarter. end they'll at in of implemented

Steven Hislop

more And it's half-hour, -- the we experienced, one have is, end hour through sales thing And in that and on places. thing. important has to do how projection of to know that. do maximize a this basis That's day, what the and sales aces are quarter on it's of the proper number is at scheduling people on driver this

on through do number flow again, and punch the that's of in, early the late what as thing. on the as a one savings with then is, And labor So sale. and then the we'll digital, far

Jon Howie

scheduling year, from X One quarter. X anywhere fourth we week. that we because the fourth extra opened thing X in everyone, quarter. in the of we're somewhat because as leverage to This had last quarter, well remind to But extra some stores open was the in fourth too, the year, to offset

in efficiency that keep So mind standpoint. from an

Andrew Strelzik

And great. one That's from me. Okay, last the helpful then color.

to confident off-premise not be of can quarters how comps the of growth are that business? in-store on couple the off-premise. rates, attributed most business the based your like Just the So it impacting is last that you looks

thinking going out Olo, start off-premise roll an as impacting you So in-store? and may the acceleration how may maybe wondering see guess about that impact from even the perspective, to it be how you're I'm or I an forward

Jon Howie

we're mean, seeing, you're higher in right, much Well, obviously walls. think the off-premise. X impacting But I I it's don't increases

may walls still consumer be impacting versus and more in and bias on grab our get then focus to think buzz X But is not change seat. we're a to sitting down to I doing go it is of what the maybe. and

Steven Hislop

We walls. experience. want inside going but more the convenient make actually we even our it experience -- the that do much because Always. mean, Always. it's -- I the it's also, expect to always to guests is Olo for X

Operator

will Ladies and to gentlemen, that closing session. for conclude time, or Hislop any over question-and-answer the conference Steve our back At this I'll remarks. turn additional

Steven Hislop

a all good your we you thank and I questions. much. appreciate evening. you, continued Chuy's, and so interest and be all have Thank in Jon any and will always available Again, answer to

Operator

today's again and you now your Thank once disconnect. for may you conclude conference. will That participation,

Chuy's (CHUY) 9 Aug 182018 Q2 Earnings call transcript