CHUY - Earnings call transcript Q2 2019

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Operator

Good day, everyone, and welcome to the Chuy’s Holdings Inc.

Second Quarter 2019 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 will turn the conference over to Mr. Howie. sir. ahead, go Please

Jon Howie

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

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

I’d call the the like of turn out that way, With to Steve. to over

Steve Hislop

Good thank Jon. everybody, you, and joining you us the today. afternoon, Thank on call for

overview a in go made then the begin over with and results we’ve of various our progress initiatives. our Let’s high-level

revenues are X.X% over see pleased line grew top continue X%, the We second restaurant we as including our during a sales. comparable improvement quarter in momentum to by

continued In the foundation improve put profitability efforts by during place by drive growth term. to hourly long while and strengthen that line our believe costs labor approximately To initiatives to higher our important terms are sustainable end, we improve further our inflation and were we in the various our in profit over beef impacted of the top rate profitability, restaurant-level X%, margins operating were to able negatively our produce quarter. restaurant-level and we will

frequency in sales the better initiatives, and campaigns me let on market launched you and Chuy’s experience Houston. off-premise in effort to awareness efficiencies. to campaign, marketing that, and as Houston educate our With Chicago, brand as investment improve targeted an labor In restaurants in increased marketing technology, Chicago we in well in which include April, strategy our drive targeted on update

Our YouTube, stadium Hulu and road efforts and platforms Spotify. like digital include promotional advertising radio, on strategic and signage,

have the markets we quarter. pleased improvements these during and date, been we’ve with X third in seen To the

our Houston and Chicago, continue push to adding marketing the will Orlando We also in while mix.

in and ahead, marketing our a targeted efforts, plan quarter, the campaign markets. Dallas. paid fourth to search, location-based Looking Apart continue all for employ we will similar platforms of these media to campaign paid we social in from launch

technology. Turning now to

We rate are pleased Olo. online with the through adoption trajectory of our ordering partner, our

end website to-go of helped the as the quarter, promotion drive through ordering of adoption of sales our second As XX% rate. all represented increased our approximately to-go

for will Another aspect synchronize Olo exciting directly also efficiency accuracy, process us our to but offering. ordering only improved Dispatch and allow online delivering from with is with order our their and our provide of options customers partnership delivery Dispatch our not various website.

by to goal is the Dispatch stores integrate year. Our to of end the our of all service the fully

plan to front, to improve table loyalty foundation our a We platform intelligence, and our of important September. launch initiatives front-of-the-house working fully serve system management in gather a we ultimately as customer to the us efficiency allow end program. further technology future Additionally, a technology the our the will are by with current on believe for

and it growth, not helps in for an Catering strategy. platform but our off-premise important out believe top during as serve of catering additional Chuy’s gives catering us part X quarter our awareness rolled We of the also markets improve line can another brand. that the only second avenue sales

last in new year. compared in to revenue the markets of the period quarter, $X.X second approximately the to X end same before offer catering XXXX. contributed $XXX,XXX For plan in We million approximately catering

new store rate as inflation our able to were pricing well offset we hourly our menu as labor, quarter. On labor the the to labor made efficiencies in during leverage we the improvement

more as initiatives continue, and pressures hires path than achieve by important labor X. labor new ever glide approximately targets it month system allows reduce our average by As XX% become opening us labor to

We teams’ second Indiana, X X to Chuy’s Huntsville, opened Texas. new instill Hamburg, in restaurant Switching Houston, second to Subsequent the the restaurants and successively quarter, to development. each openings X opened Carmel, demonstrate the operatives time. well These and X date bringing of performed the additional openings have to in during culture short new our a end development new restaurants. ability our total and Alabama; truly we in to Kentucky; quarter,

opening Looking have to open of developments expected the the middle in our to plan, quarter. XXXX complete more one ahead, we which is fourth

our markets said real have key to our and testing new top for profile allow tool. we us at utilize will are create our estate future planning to and a use identify The markets expansion that previously, in an our development. tool successful work psychographic developing XXXX to it tool be important to this development it and To currently hard of for will analytics end, going As are forward. we

to the Howie, of detailed more to second I’d review like over a that, our call turn results. quarter for With Jon our CFO,

Jon Howie

Thanks, $X.X an XXXX. quarter well from were In just million XX, quarter from to primarily total, store incremental in operating revenue as same was weeks sales are last comparable as included incremental new had million a XX that partially weeks growth. we not increase offset the the noncomparable Steve. by decrease operating additional approximately year. restaurants in mentioned. second the sales restaurant Revenues of in increases X,XXX driven by revenue $XXX.X during increased the $XXX.X million second in ended compared The June XXXX, for quarter to These

quarter pricing approximately comparable approximately the addition headwind quarter, Easter. in check, Unfavorable sales points in a our was partially the impacted the of X.X% sales of restaurant offset decrease a customers. X.X% negatively quarter by the and increased Comparable by during XX-basis-point result conditions X% in as basis in timing to weather increase weekly average included XX second second during X.X%. average a the Effective

discussion driven in X% items, line unfavorable of pricing, in of a commodity XX was and to percentage favorable inflation. a offset cost Inflation of approximately to selected increased as revenue pricing by dairy. beef sales expense largely XX.X%, partially produce attributable basis points During by largely

With expect increase approximately we commodity inflation beef to and for the year-over-year produce to now year. of expected linger, X% X% in the

new Labor markets. and rate cost partially certain hourly as openings decreased to XX basis stores approximately This a points offset training due and price of approximately XX.X%, mini new by expense higher X% efficiency percentage hourly at increased of was our inflation to revenue labor other store primarily on comparable for in labor managers. lower rate leverage,

increased pricing percentage credit to repair on points to card leverage due basis restaurant higher and increased as partially XX of service sales. insurance cost, a of delivery XX.X% offset cost operating restaurant because supplies favorable on and Operating charges, by revenue and maintenance, higher

level Marketing increased to a to new expense certain by opened national costs overall. revenue basis expense rental of X.X%, newly points to as markets percentage as percentage well higher driven larger primarily restaurants basis estate taxes XX X.X%, revenue higher initiatives. as real our a points due at marketing Occupancy of as XX increased in

a last management degree increased to – year, $X.X administrative to compared to and lesser in and in equity period in by bonuses quarter second and expenses same the driven million from increases the by salaries performance-based million $X.X General compensation.

XX increased of points As a to basis X.X%. percent G&A revenues,

XXXX to diluted the summary, was $X.X In share year. for second compared diluted share $X.XX million per same or of million quarter income in or period per $X.X the last net $X.XX

as related closing the per or During costs share million tax $X.X did to $X.XX of diluted of per XXXX, well we diluted $X.XX net X of a second share legal the quarter quarter during tax related of incur to first of $X.X settlement. or as net million XXXX restaurants

ended $X.X or to net of $X.X per $X.XX per million XXXX we of cash income the second quarter currently the $XX.X on same balance with or diluted was period As share result, no million million sheet, have debt. compared diluted the a year. the adjusted last and in $X.XX quarter for share We

our With XXXX. outlook that, review now we for will

share raised to the our for year $X.XX of have full share adjusted and $X.XX between compares $X.XX. diluted This XXXX. and for diluted $X.XX XXXX share per earnings expectations $X.XX from per earnings We per to

updated of continue year Our guidance for assumptions: growth comparable sales following based X.X%. restaurant on is to the the expect X.X% We to

preopening restaurant of $X $X.X approximately to versus million previous million. of range $X.X a expect million expenses We

We $XX.X expenses million between of expect and G&A $XX.X million.

Our effective we million shares And range between X%. weighted X% expected shares outstanding range shares. to versus tax to modeling diluted XX.X a rate XX million of XX.X XX million million are shares annual to average is to of previous shares

million capital new improvement versus $XX.X estimated million. previous a expect of and versus restaurants lastly, allowances million been between already X X. And to of open now to of completed, expenditures X range to this range $XX million have $XX net a which X previous to We range tenant of are our year, $XX.X

turn up. I’ll back to Steve call the that, With to wrap

Steve Hislop

Jon. Thanks,

sales to in the still we While with we development are us our are have that our initiatives the improve pleased confident with will the disciplined of come. years strategy our trends, put accomplish benefit we we more in profitability. place – along end, store-level To in to trajectory to

and possible like to their closing, work employees. every our to dedication Chuy’s hard None in the of In accomplishments would these guests delivering I’d experience all Chuy’s day. without be thank of our

are questions. answer we any that, With Thank you. happy to

Operator

go Hodes with We’ll Instructions] to first Baird. [Operator Mary

Mary Hodes

labor provide factors color a that the for that Thanks more Could in afternoon. the second XXXX? sustainable as of Good drove the the line and look half to how question. you you improvement taking think you is the little on bit

Jon Howie

This Thanks Mary. Jon. is Hi for the question.

we up. obviously, our We with that training continue down, will to believe of opening that labor are be number the stores management

see, efficiency stores. to the continue like the in talking about, new We we were increased

of in right Although, at store up we’re first the opened more the opening of X year, the QX. X half we last only

the more then last of some X the X labor others we we to X have up previous year year, year. to that we half with efficiency So And back opened against in compared that should the left. about have

much So line on in answer, expect to half. as but but yes, see leverage long-winded we some having maybe as the we not saw we this anticipate back that quarter, item still a

Mary Hodes

taking for Thanks Okay. the question.

Jon Howie

you. Thank

Operator

question with We’ll now take Slabaugh Inc. from a Will Stephens,

Will Slabaugh

the and guys quarter. on congrats Thanks,

same-store pretty quarter the after Your a It start the implies off. wet hurt ramp weather. April nice in to growth you sales

the the you So as perspective what saw you period as I date-period. in from well seen have was understand a trend hoping help might you that us what in quarter-to would

Jon Howie

– points after flat about and were this weather like, of impact is little period, fourth saw Yes. Easter. about We XXX saying, related Jon. the that to was are we negative the and timing we in to Will, basis

But first in We quarter. total trends and see saw in we the well. also related X saw those to basis weather as did similar we the pop about back XX to points in X

with right X averaged period highest they one slightly and around So being down. the in and in X X X X

we And X. in period in that X saw a X X X period So and X. trend X continuing in period

Will Slabaugh

Great. in or open looks you that that on And the revenue. that color. then – XX Thanks The saw a the less nice you from months put improvement follow-up for a were really release. press like stores

I stronger some some of outperformance in of How driving of talk of bit relative think of of from growth newer stores the new we’ve in to in a the year-over-year that’s seen the year on the stores? highest much with more a while. little do newer has you what’s last Can some about you markets? that softer maybe basis some performance rate versus the volumes a

Jon Howie

Well, I It’s the of the both. hit little nail head. on think you just a

base seventh point that’s comp We now to in rolling the in the new basis headwind XX – – in those in are stores the that that our second about of lot is sales a newer a XX – base. quarter. our even stores to higher And comp or the being in quarter. quarter related the third headwind in We saw have

basis We’re at points. about that seeing XXX

So expectations the right And in those up exceeding opened we that And the or with expectations. incremental we And our these our current of what X are they’ve seeing are in stores were into mainly like now year. targeted incremental proven opened you’re said base earlier, the at that base. markets out stores X AUVs. up high

So we’re openings. those with very pleased

Will Slabaugh

hear. to Thanks guys. Great

Operator

O’Cull Chris with We’ll now take Stifel. from question a

Chris O’Cull

guys. Thanks good and Yes. afternoon,

on follow-up the mean, to given new a performance, there units more is comments. year than opportunity Just this open Steve, next year? the store I an

Steve Hislop

of a it I’ve range thing I XXXX. I’ll X, there the yet and I want tell in and working again and mentioned for key thing X I’ve be in you, is right Chris, and to health real, that the our and focus. now I’m think while, quite we’re increases, us mentioned business that the probably the One counts customer still we’re will for main on hard not same-store of and real

to X X right So you range see in store will next us probably that year.

Chris O’Cull

Okay. the cost outlook? Jon, to labor better the was And based upward guidance the revision then, earnings on

Jon Howie

a over continuing it as we last cost the upward sales – in as about earlier. avocados, the beat X X really labor. could to by fourth onions, see I know, X mean, Well, cost through to sales and quarter. the the points seeing we’re is so year we down why it we And earnings, think little projecting the little much XXX bit dairy pressure for but – in we’re pressure that cost to the related right versus we X now, costs that’s the of third range trend third produce, offset now as just of beat commodity that and well. basis or we’re to and that sales mainly running the earnings. as quarter, quarter bit little in everybody didn’t reason you come up But the in we on expect the It’s – and of about in a what knows I a

Steve Hislop

the end thing we’re a more some of another in the little restaurants of quarter, like have open next expensed. to first the to top bit third Chris, right of going the which quarter as saw, at will that the off probably preopening at X year, of in because year, beginning And preopening X be you on we’ll the that, beginning

Chris O’Cull

Do Can guys And Okay. take quarter explain that compared what drove greater pricing you check then you last in had check That’s what growth? maybe? the quarter. helpful. additional to the was growth just you

Jon Howie

pricing. X, basis a store in had X took then additional We we comparable that. that base XX we in And had we Tier that mix points our didn’t. comparable related base, the did had stores was Tier XX or price increase little about we to store upon What and entered more when we’ve our where based

and got I that. things X%. from points ordering X.X%, and what our, on and but basis about And top the mainly is And said of creamy mix not mix queso the in bulk jalapeno, actually that’s and now previously, about we and think catering so – the about we’ve we’re, is like rate coming call, that. entrées, we to-go, We’ve effective of XX

Chris O’Cull

Great. Thanks, guys.

Jon Howie

Thank you.

Operator

take from next question Strelzik Markets. We’ll our Capital BMO Andrew with

Andrew Strelzik

afternoon. Good

You’re brand how do about any feel does absorbing of that power like that? into of you traffic? normally bit pricing run. And How little X on your feel like higher the that you having brand? months impact running than not, weigh kind is you thinking do pricing If it’s into on the the

Steve Hislop

it. We’re into X months

with customer take flat away probably pleased And as We’re and as improvement that’s it. from the prior where now, an counts, headwind the weather, the year. away it’s far take

we it about excited we’re as So forward. move

years, X.X% that’s went our the a up a I last lot to As going look at make to higher continue what the so always our It all market, I will at to always, of though, drive specific, lot than X%. to menus, a X market lot we look the we it look at the happened just have prop percent in sure over competitive as be. set guys value

we and markets. deal we we’ll within So value little do the indicator a will we number then in That’s study what we’ll there move cost on with bear, that bit the is had forward. price play see from XXXX. how take, internal But up again much and in we’ll more market pressures as the the that move the one coming

Andrew Strelzik

believe I’m how Did Okay. trending things And you trending to have started particular Olo? about the an in marketing things business, in inflection you that curious, once there? be a see been talk around May. was little supposed more in can you how I it off-premise bit in And are

Jon Howie

– adoption we’ve And seeing We promoting Yes. that’s is and X. Andrew, overall this We that saw of started saw rate We very go the up, which to XX%. with. Jon. we XX% been to now XX% XX% pleased period to-go, around were in

go go the of the up definitely our that we’ll that, fully end that. saw up hopefully, we further. rate, even the year, by When Dispatch we So adoption implement on see

Andrew Strelzik

flow other? within it my I’m think picked And operating you I’m impact a curious feels with. better recently. Chuy’s in way players industry creates do does the a just environment maybe sure could or like closings but feels the one guess some creates necessarily you. not midsized question. and actually last or of that there brands, switching up markets, it’s some in It the you have news your curious, guys Okay. like with I’m environment for not operating if industry the be you if like better feel the around It then that bankruptcies for I

Steve Hislop

I mean, it’s as has forward. and same a to operating move been really tough right now, been – while environment the a it’s The be it’s for for think I tough we don’t changed. environment continuing

think customer off-premise I and inside the the an really the making next that the count. standpoint the that the on people balanced over really end the be move balance year sales execution and up that will ones X-wall on sales

that’s focused we’re So what on.

Andrew Strelzik

Great. very Thank you much.

Steve Hislop

welcome. You’re

Operator

question take a now We’ll Setyan with Securities. from Wedbush Nick

Nick Setyan

Congrats you. quarter. on Thank great a

of the terms – is and kind there’s that there of of mirror? initiatives, to labor like kind maybe you more rear-view the opportunity Or you come there or right-sized more there? In there is feel are in do things

Steve Hislop

of initiatives something term, we that over years, as pieces next or the Jon different as equipment some going at lot long on. much working looking don’t have had the that’s – think quarter a technology with to on, the some stop we a the and equipment. prep To or we’re leverage, X.X X I it been and just call of rest smart Nick, we of it like way the systems with you, honest year. fast what second be forward. we’re something the as we continue getting have But and move the as that’s started, as technology not think, lot I in years, smart we’ll to be and always prep said, it’s ever whether work world’s the is probably now, really of changing through we power

Nick Setyan

Got it.

In terms markets? of openings year, new next any

Steve Hislop

No new markets.

script, As that, really of whole get tried-and-true psychoanalysis we’ve looking I really and stores. start last real our that mentioned when estate, the piece think strategy in of testing the I we’ll I once had of XXXX at my

into not So I until probably markets. any really going implemented, new that’s be will

Jon Howie

stores. XXXX

Steve Hislop

XXXX.

Nick Setyan

the And in a really is it strategy mid not yet. fair last even know going it. it’s pricing committed X% if Got assume range? is XXXX But haven’t it question. probably we guys to you said to X%, I like to in not be the down mid that

Steve Hislop

yes, is I’d and I’ll the I’d dealing everybody we say ahead again information bears. do the but mean, I market are. Again, obviously, probably go – But what with

I out there, So see year. match get or what competitive to a this they set you’ll probably think did close

around be And don’t X.X% anybody’s to so X%. think to I that going

So spread than I will think the the be little higher mid-Xs. value a

Nick Setyan

you it. very Got Thank much.

Steve Hislop

welcome. You’re

Operator

[Operator Andy Instructions] our take with We’ll Jefferies. next Barish from question

AlexChan

Maybe Hi. one other at better could or the This around check that and bit approach implementing menu. research, maybe existing there? if value is Anything a talked design on menu believe I point about for question you little I differently. highlighting Andy. Alex menu some things

Steve Hislop

menu Right have the change bit design study really they’re grouping it’s now, differently. of great did on we at thought first on though, It’s on certain really we page really it’s question. that strategy and that Great using rate. differently, little be some more aplenty probably the the them a Yes, our items a where little highlighting happening any a our October. We was from to end at going a not question. do items,

the Looking really at design. this, our entire menu as

all – that so did and stuff. focus the we and And groups

that was exciting. So

at, period we change the you that. So change, might October that a at it’ll look might deletes end have right the we in add-ons that a we’re when we be XXXX of which every about at at second now, do at beginning couple But price our – a of year, usually only time. do beginning the excited of October. design and And couple the particular

Alex Chan

say, keeps the you XX- you quarter? Got that saw that to range, of do in mix it. in think XX-basis-point helps kind slightly But what positive, second

Jon Howie

talking is the changes do, be from a bulk mix I what talking Steve’s is that design but change. really about I off Because that would different menu whole about was items. mix the

all really set to and So on the that’s not even go that’s menu.

Steve Hislop

made jump. that And the biggest

the was XXXX. number million call, that’s quarter again catering, this As in second quarter I you mentioned, I up and our our against X bulk saw think, $X.X year, $XXX,XXX in

So that was the big mix change.

Alex Chan

And might G&A unlock that in-store sense. do system play loyalty then little about Got that’s table or more into could a you into how bit off-premise? mentioned, color it. and guide? you’ve included That give of the that that the you frequency into is big management driving thinking makes just feel in like a cost the program And

Jon Howie

And The we’re included is in looking when reward at versus a looking from G&A program. more standpoint, cost is the more we’re at loyalty – we’re what looking guide. engagement at loyalty

programs. going half do in types eat. being in, But loyalty different we’re more allowing said, research all customers, many back track track that what what they – Although said as table times track the system of new – here with to they on the management to us how come is dinings we some different all

out Salad. have Fried with a likes Fried Chicken specifically, say that new come we Chicken let’s and we our So Elvis Elvis customer a

X We that we coming and Fried something to in in Chicken can go our queso segment months, like a try new can specifically back customer if like hasn’t invite those the that. come Elvis people marketing in Chicken Elvis our free Or for Salad. them after Fried a recommend with and or

with our their they’ve really like segment what customers really in that have feel to VIP experience sure Chuy’s. to and ordered them it customer back make they what or allows and has been, a So to us just invite engagement in our

Steve Hislop

with obviously move we increase Wisely. as and Yes, addresses our forward e-mail

Alex Chan

Thanks. it. Got

Jon Howie

you. Thank

Operator

Dan We’ll James. Docherty now from question with Raymond take a

Dan Docherty

in are sure how quick value week. Dan is performing? if This A any certain regions, or on guys. for initiatives on some Vaccaro. new system-wide during Hi, I have those believe Brian not been color I’m but Docherty that’s question. the there

Steve Hislop

discounted se. in I some That’s night, that’s bit fajita to not little not and per Chuy’s a nights – at taco newer $X and which a we where get margaritas Wednesday we the the and the do those we want those X we’re we day. a the system-wide definitely did Yes. increased done. pleased offered because how offer one Tuesday stores little is strategy the they’re I’m price, we our markets, certain every X – all those time a traffic think, to stores, And no are it’s some have are the and is one’s and is expensive But more as in days, night, a where awareness, which most in with items We’ve Obviously, main butt’s it. thing. seat

we’re at So it’s run that in least and that’s we’re as to It’s said, year for improved, what there. improved. And going stores. those a doing

Dan Docherty

one other off-premise then XQ? what one, And which Great. quick Okay. was is sales in mix

Jon Howie

and as actually XX.X%, it well. was XX.X% up

Dan Docherty

Okay, Thank you. great.

Operator

Advisory. question with Telsey Derrington We’ll from a now Bob take

Bob Derrington

of think some that Black trends earlier I Texas. within the saw today Box, of Steve, weakest seen you. out we I’ve specifically Thank

I sound think right what’s market now? the happening it’s continue that X.X%, in Steve, to what such you’re down industry almost Obviously, business down doesn’t down traffic with success comp seeing seeing versus trends there down given have as about the though in dire the your Texas, trends. seemingly X.X%. you were

Steve Hislop

also and probably but that’s quarter in like But market the second a I we to the they’re – and Houston, nice very, part social well conference the market, we Austin, of home always – great company. on our in our digital, been obviously Houston, that’s AUVs paid the – in did top of for our doing of now. has strongest that why Houston, talked continued in we last has the call, as little you about although and of the – some at very beginning see we rebound This there, think markets focus the paid did reason softening some felt have us marketing and Dallas where be Yes.

Bob Derrington

done Texas, trend? how, of any on specifically encouraging. you’ve kind of give That’s you a really within read industry versus Can the kind color? us Any

Jon Howie

our Well, like I industry that the trends comp mean, our doing said obviously, sales. Texas you said, are to, compared the of than better stores average Steve

trending. where that So indication a of little would that’s give you

So better X% they over July definitely doing are like said, I our running than in –

Steve Hislop

for trends Yes. of mentioning right a lot the weather said I’m fourth pleased people that. away of take the having the have period kind quarter overall the now X, specifically of of Southeast And with that, actually, whole that been

we’re excited. So of kind

Bob Derrington

Terrific. Thanks, guys.

Steve Hislop

Thanks, Bob.

Operator

no questions appears this the there remarks. to additional like are it further time. And Steve any Hislop at for closing conference I’d to turn back or

Steve Hislop

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

Operator

This Thank call. you for your concludes today’s participation.

You may now disconnect.

Chuy's (CHUY) 9 Aug 192019 Q2 Earnings call transcript