CHUY - Earnings call transcript Q2 2020

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Operator

Good day, everyone, and welcome to the Chuy's Holdings Second Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time, all participants have been joined in listen-only mode, and the lines will be open for your questions following the presentation. On this call today, we have Steve Hislop, President and Chief Executive Officer; and Jon Howie, Vice President and Chief Financial Officer of Chuy's Holdings, Incorporated. At this time, I'll turn the conference over to Mr. Howie. ahead. go Please

Jon Howie

at and access Operator, If By everyone Web now, it Investors Thank our good second have site our on to be release. in quarter should the can section. you, found afternoon. www.chuys.com XXXX not, earnings

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

Steve Hislop

we encouraged second us the Good staying Thank joining you safe for everyone earnings the healthy. I second and quarter. quarter and I'm thank Jon. afternoon call progress is the everyone, incredible today. you, made on during hope with

are business, this testament challenging environment. work and Our COVID serving hard results loyal our a during guests to the transforming in in team's our our relentless dedication

members, incredible be and For that, group couldn't team I'd alongside like people. I our every to to of of be thank positive one working this

as we beverage pandemic service family delivery entrees, our delivery DoorDash, efficient and with reduced restaurants streamlined as new a a stronger take-out menu model, operating to curbside model partner. adding at In subsides. kits. onset as this COVID-XX number emerge meal that took national enhanced pickup to of offering and conjunction ensure well a we convenient steps several you when our off-premise will procedures, into We with our transformed we the recall, If feature well our an brand as of through

hard the opened end Starting to of mandates, reduced XX dining open. hourly our May, of with June the our and We of the to dining managers employees size. reopening we by local team decision the began were of state quarter. of we have stores furloughed had rehired the some of in majority furlough accordance also all in and are in our rooms a rooms employees pleased We also currently make our the and had by and second the process end that our to remaining

in and of in all both are well-being our states, understatement we XX,XXX per everyone's of, and we're number are our sales generated sales the say remained more rollback level. restaurants to our with of increased As at recent perform guests our goal safety will quarter to reopening open. various pre-COVID-XX thus reopenings dining our improving and continue volumes efforts sequentially that continue even eager see off-premise the pleased double in cases to Texas and dining third the the including dining guests. back its very Moreover, June levels. Despite far from in our be solid proud is normal in rate with we our restaurant indoor welcome quarter no our throughout with weekly staffed, today, rooms COVID-XX restaurants, strong to second our remain with are quarter. of Florida, second dining April have rooms, in than salary sales a all, our all and XX,XXX from rooms All of but to to to employees results that one average we have It returned its

efficiencies. also of the second Through made to management, in restaurant addition improved sales margin labor our we operating basis were quarter our and we XXX our to operational performance, better level able strides cost improve enhancing by top-line In points. great cost in

lower In free fact, in despite year-over-year the June period, we sales. to generate were flow able cash higher

our that are we with increase positively when restrictions build the are expect various will and of as now freshly operational room our our second efficiency on delivery in of Chuy's put our we Mexican dining a convenience operating or safety. channels our been begin value, marketing run. dining in rooms the inspired continue the dining on the safety and restaurant that prepared to to resume offerings guests rooms further environment in loosened, With our pickup place fourth our key in homes. to comfort we contactless mandates, long either at our and brand, state With CFO, procedures to our based our our well has Howie, turn we confident convenience the in and over quarter business greater the capacity Jon recent safe Value open, hallmark upon although costs combined limited While enjoy the in always will detail. capacities the quarter dining our impact effort can discuss call rooms, that, can with their I will to local favorable of we results messages as of the

Jon Howie

million traffic second decreased The to decrease year. $XXX.X decline last restaurants. closures the for in to weeks X,XXX In second approximately loss XXX primarily same Revenues by quarter June including had of COVID-XX, from weeks of quarter XXXX during quarter ended operating $XX.X due to operating nine the XX, a XXXX. million the was of compared Steve. temporary Thanks, we total, the driven

the our capacity quarter, dining to varying of off-premise mentioned, only rooms end to restaurant transitioned during degrees Steve and operation first quarter. the second of or reopened at we the As

restaurant note XX.X% second by approximately laid earnings the average that of our included during sales Please check. For in and the period out release. second quarter, customers, Comparable by our second cadence quarter in decreased today's off-premise offset improvement sales increase XX% X.X% in we've for were average the partially total quarter decrease revenue. weekly XX% sales

a Turning a of chips result in to All of Car. salsa, percentage sales limited expenses, deflation to and primarily and style Nacho of a all, quarter basis second our was approximately XX.X%, switching for decreased buffet X%. cost XXX eliminating commodity as points as complementary revenue the menu to

currently are in seeing percentage revenue we XXX and Hourly approximately store on or QX. sales during our to to XX.X% ahead, transitioned operating to cost as and QX, this the decreased cost was continue expect substantial a QX approximately of July personnel Looking a rate compared of Labor XXX comparable when points number employees X.X%. our furloughing inflation during -- a to labor company as quarter as increasing points inflation through QX approximately basis and stores hourly of off-premise only and model. management the result of an basis

to sales staffed operating of a expense our service points alluded off-premise well as pandemic, employees initiatives last approximately as of as fourth With with our now effort. expenses. in cost the basis in quarter sales to-go and store XXX XX.X% charges third Steve percentage are while a and restaurant marketing of compared result cost as to to primarily cost points basis a percentage the we fixed percentage growth revenue expect deleverage basis the our business, to as level by rooms. increased local since the that our supplies of to mind, and revenue As sales labor XXX points current to and marketing COVID-XX Marketing increase year's dining of a improvement national number X.X%, quarter, XXX of XX capacity we quarter response volumes. of to expand furloughed continue dining in during suspension to in Operating current delivery earlier, levels in room the due as a as from conjunction our on driven decreased reopening, rehired for have our more relying we a to of effective increases

occupancy from sales or and costs quarter and we share earlier, of In deleverage General to decreased services administrative of per same XXXX period a summary, in salaries million to bonuses as more to of resume decrease our net and was diluted million last fixed professional second reductions, planning the management a $X.X increased revenue suspension net by of around per Occupancy $X.X for pay share temporary income of partially $X.XX and pay $X.X the primarily fourth quarter XX.X%, year. income the sales. as X.X% same X% in primarily XXX driven to last the percentage basis mentioned and period result $X.XX second million the vendor of year, Steve IT compared points expenses. marketing higher quick by or offset quarter as in in during rebates. million of $X.X the expect expenses a and efforts a spend of However, would costs normalized are to the diluted

all share $X million second or quarter costs of $X second year. or we compared $X.XX XXXX, the income of share was that restaurant net of million insurance per into period diluted settlement account, $X.X same received tax $X.X and received one-time for XXXX a favorable per million. of last closed CARES adjusted million of quarter the Taking to During to adjustment million related Act a diluted in $X.XX recorded the the $X

strength sheet. like on and to touch balance quickly I'd our liquidity Finally, our of

funded As that call, to steps well is we've we taken long-term. on ensure last our business mentioned our the for

net in approximately of issued outstanding to X the million the proceeds credit company. million portion million $XX to shares During of of repay A $XX.X proceeds we our revolving of facility. stock, resulting second the common was used the quarter, balance

quarter, we Steve. to outstanding position challenging believe available million turn equivalents call $XX revolving in the back end As we cash of and weather $XX.X and financially all, cash facility the All of great million under in debt. this and in With are I'll time. the we to second our that, had no credit

Steve Hislop

thus Thanks, room and continued roll great into momentum recent had Jon. back dining the in To in quarter certain we the states. our far despite summarize, reopenings a sales quarter, third

more are efficient Our sheet balance and business operations is our strong.

near to team will COVID-XX the is market believe to continues in a future, level our adapt any nimble to and there the very resilient uncertainty of challenges we While surrounding condition. be in remain

pandemic. questions. these been happy do. possible our Lastly, would With of hard during that, you any all dedication all despite we're this none employees without work Chuy's have for Thanks answer the times of you. they've Thank accomplishments to hard endured that and

Operator

Rutherford Go from from question first Stephens. Our James ahead. Instructions] is [Operator

James Rutherford

folks carry all given XQ forward the of this Hey, were of so side model we cost you And expectations then here. point? for if could labor kind level operating that taking possible, assume pieces margins and the into margin moving share at should sales those what and and the profitable were sort questions XQ given I forth? more some just wanted of pieces of how the within be restaurant what sort you stronger how July rehire the thank to much in you here, than on given

Jon Howie

Sure.

Our and that operating margin still have in the XX% statements, level. operating at July, we restaurant don't level around final of the are financial course,

looking at However, in to increase projections we're running when my XXX expecting I'm for QX, XXX points. QX labor you're to said like and this to quarter. basis remarks, at that XX.X% in I

looking XX% and at QX you're during and QX. between So XX%

expenses, of are sales kind operating what operating going where our depends little on Our crystal be or expenses are. are, right, our higher. the of our a ball, of our rooms, with a the they it remain little sales comeback bit, consistent increase to really dining If

we my sales, of like we're I a at quarter, QX, it points that increased in going kind increase they XXX to and we to XX% basis we're was I into this -- to and well, that period of XX in XX.X%, continue points XX.X% QX and So, XX% range our in we're then, expect those ran have a seven, said -- in QX for QX. and basis think expecting cost remarks, looking looking XXX those about

James Rutherford

expect when all Tex excellent. And know start menu? full the Mex I reintroducing to off that now my my continuing local question, certainly just Okay, on is do favorite Chuy's again. you

So menu the course next view year? throughout XXXX of the with on return broader the that, of pleased your but what's I'm and

Steve Hislop

quarter, third menu still is This is see where the the limited currently. you'll Through the Steve. remainder of it

what in a have our items of quarter, next fourth the You'll fourth be on back in quarter will the the of year. us reprint menu pop with to menu existing see in probably handful a

James Rutherford

okay. Excellent,

Steve Hislop

you. Thank

Operator

Our David Baird. Tarantino next from ahead. question is Go from

David Tarantino

congrats on results good in tough Good afternoon, and environment. a Hi. delivering

Steve Hislop

David. Thanks,

David Tarantino

just surprisingly sales just about pretty at labor of range, I have if comment low the relation Jon, you current matrix you -- question, the specifically, in kind low-XX% trend. look a in about to that said, your that's

mid-XX%s, recent kind years, I XX%, now So, it's and just elaborate and down can I roughly and what's at than that? that. it's of more lower you mean, now the on been are your driving if look sales

not is is driving of that guess, sustainable what's think what equation? do you in inside I or it, and So, that sustainable

Jon Howie

I management needed And Well, managers time, and we David. we quite dining we've you answer when opened our it's mean, great per went part four working what when room. a all question, up way. some COVID for situation, know. been basically the this I'll we reevaluated the we to it as managers down And on store our into brought

of have we So, forward. managers the decreased store number per going

has that So We've in better the we practice better new that on some tremendously. a labor even past. has place, tools it tools had effectively. But monitoring best we put us allowed standpoint basically into more and got helped we're have that to do as to visibility in and

we believe and and back XX% what XX% to we we statements. we said we level, that to went so that levels, truly were when in if look labor normal we're public, you when similar back can so, And back those to at get have can done,

Steve Hislop

XX we the the smart of it items of are We've There been part the going had that with into in It's probably now. number. for of -- now, we about COVID is bit right currently around the currently evaluated also increase few of moving little different XX% range things in XX% that forward. goes XX% XX% of operation really there. and in with you'll to-go Jon hope what obviously, to about have It's see that's XX, why to in the on ease saying had Right a to right to on answer double we a weren't. couple next the along year, some the open out see that dining Obviously menu menu. that before -- we'll we the mid-XX%s But menu, and that of of go and that we other is A items that the menu. those prep south regions. really is rooms yes, of come to our the have for the way other other through talking we low-XX%s once things always us, efficiencies a all the good all few and

David Tarantino

managers feeling are in then, Steve, to… And in about you Yes. reduction relation how the of number

Steve Hislop

question. that we've Friday at X now, closing great key in through we're Yes, we're operating the one, on at currently. X. Right had us that one Thursday, the is, we're and reduction during But Sunday hours also for closing week, number Saturday, a o'clock

very menu So moving part But that of of our the of future was that. type then makes forward also, ease execution of with us and that our that menu comfortable model. current

David Tarantino

thanks a bunch. Great,

Steve Hislop

you. Thank

Our from Securities. Wedbush is ahead. next Nick Go from Setyan question

Nick Setyan

Thank you.

capacities weekly are the from get the sales don't can In a rollbacks it July of there? to terms where give us come scenario that And have cadence company-specific again? you anything terms can trajectory or again, higher the improve in maybe if we there trends, drive to does the of do you positive

Steve Hislop

some some get as XX,XXX Obviously drops XX,XXX, out and in Nick. I see way, this we we finally double-digit a Florida like we did the to XX% week, tired to of that the running first this it at a of weeks, answer start and XX% that, drop the states weeks, will what we Texas, whether percentage they in but running were retracted people future, I'll and we these of XX%, that Well, from backwards I happen saw getting peak are think, mean, two and in again. in

only toward X%. And of we seeing of a started basically end July, decrease so, the

where to peak So June our in we are time. pretty were we that at close at

most glass XX% capacity, question, much states. more are distancing. or of do that really answer the XX% that things where we can at are can the don't do XX% to on I we is your with know part than second inside are we that, which six-foot boos that. the we when because like few things and maybe There However, a on of place

many boos. that don't we However, have

room So that that doesn't our either. help expand dining much

And be seeing increased to sales, in sales, the used really extra substantially. so, In our expand that it's get boos, so has XX% can of past, a business X.X% that that we're and our right at now to little XX% we and distancing, now. running patio of patio which six-foot and

are earlier, out promoting just driving heck -- is thing Steve there biggest good really we're and seeing So, in things mentioned profitability of which the the and to-go, some to-go. that

Nick Setyan

sales is Got like normal it. if And level labor or We're of that level a difficulty] some more commentary QX commentary the the not -- a normalization, it's on of better, and around going [technical QX, marketing July sales for while? the to stayed down speak on predicated

Steve Hislop

plan on get it. We'll doing No.

holiday I fourth then little the quarter. of also our And going think it. to other the partnership time, wanted bit really go why of in the it's safety be obviously start to-go, message we're to marketing it and around a will about convenience and initiative convenience the with not to and although the of that's I important talk our the our DoorDash.

be spend to to the that going was that mentioned the that earlier. Jon definitely you to value. quarter We're have So going fourth in

get with really also only we safety we convenience. well, that out value, the talk and then but and what the name obviously defining about think to Just not differences, starts our which do our

the an expense quarter. be in fourth will that So

Nick Setyan

predicated all going Understood. that labor to happen, it's sales of the uptick, on trajectory. etc, not And is the basically

Steve Hislop

the over bit little higher dining, to X.X%. A you which before, mentioned see we the the the -- little that distancing, to very if you'll If probably goes get we'll go on mentioned will labor. Jon than increase doesn't, it it XX% If a Jon able see away, six-foot that the will like similar XX%, based the means of bit be up. indoor rid be on of to opening you

Nick Setyan

already How would about markets? last certain have see then are been less you Any -- to closed? in been question, competition And are that have you dynamics, there just temporarily very those stores helpful. Understood. starting be competitive color thinking that

Steve Hislop

key great to we closed to we some been me, even a stores thing to in The for definitely have than believe doors, an I wanted do there those question. thing operators, has and there's visit and a go one we I've -- that that's and Yes, more is, in dominate the has that and But even able those today. not want do been some I while. competition great markets opportunity of

and going number we're country, Until temporarily love is whether maybe I'm obviously, after estate in right over markets I'll we're closed. into environment, our and our what's normalized all of the saying in get to So, competitive are traveling visit start the that determinations happened even along look making the all with they're real stores just department open where been of going in environment because this to time, to stores, those crabs. comfortable I I'm I'm some to the past -- those the all not. and going really And and closed now, But then the hermit able stores. specifically haven't we at

like look we will our markets existing our at and see footprint market expand and if some pick opportunity points. events of So to up some we that into those go can those we in

Nick Setyan

it, very Got much. you thank

Steve Hislop

Thank you, Nick.

Operator

Markets. from Go BMO Andrew question Strelzik next Our Capital is ahead. from

Daniel Salmon

Dan Andrew today. Hey, on is guys. This taking for Thanks the questions. for actually

progressed value can while folks a sort importance the Just and you integrity. now the strategy are the just marketing, touched bit value curious reinforce still we've to me; or Chuy's as has about year. a of thinking And any of your actions of of quick your offered the through menu back-half of lot moving value, talking couple this always a of sort brand, around take ones value you're the heard margin at tremendous we little perception but on comments you maintaining first, for there of in if forward, how I'm promotional right

Steve Hislop

Yes.

sizes think during thing as a reduced the our only. through great I that's mind to-go first our that on -- question. And we've was menu was that

at and did we is the that Anyway, like and moving fours single our also important this dining that, the of year, our that in through industry, opened layoffs through competitive these but Margarita even the our that middle we proposition meal we price value the very, we were we kits are a the these we there value with price. a than year early kits more the before specifically and we because As and even rest thing next and going set. to competitive did of in those kits did that felt we into kits rooms, best valued even item very we eights though added be those and meal knew in better we and actually everybody

are we'll So go in far that make to we don't won't look by the and at we'll believe sure packages the is the we and we marketplace. What do discount. that there need out like best really value we

Daniel Salmon

guess. I'm just past talk can in touched little what July. a of lot guys on and broadly? a you're over sense. But you past and months, in they've volatile over I markets, on just bit settled seeing makes of markets commodity weeks. protein that the commodity know And then, know maybe protein follow-up the a Great, some the I more On more markets I few down pretty on things of few wondering inflation if have side, been about kind the obviously you

just and you've the basket more had the part for can locked trouble usual maybe year, basket? how fry So, locking in you remainder you your the than of are any if of

Steve Hislop

any way. locked Sure. prior I to mean, in were COVID the we of kind

trouble. have did some we However,

shortage I in the we think of the to beef. ground on company couldn't basically quarter related we deliver because contract ground locked the mentioned in the first beef are because

the above to to That bucks had out basis subsided. prices points is elsewhere. So in And we since was that XXX pound. our a X XXX increase or go

up, kind fajitas forward beef. see would in selling, overall supply have things that see of prices problem going And affect when ground on number went stayed don't beef of we're any that and with don't that kind that a We we of quarter. going don't you of ground in the flat as the in changes we then and beef. sales a So factor the but percentage for

the period We jumped have and going seen quite little or a bit then us July, in a increase in on into X up chicken has July. dairy

that's area So significant mentioned see going any don't in the basis forward. taken but that what's earlier, problems XXX points really up I we that

produce you change on Mother that dime past issue as of in have But next right-sized can see in we of any and Nature the percentage currently. that and it a issues the but However, know, just the don't have and a significant rest we quarter normally high has really itself the that's quarter. with commodities for year

Daniel Salmon

Really Thank the color. you. Great. appreciate

Operator

next Go Raymond [Operator Instructions] Our is Vaccaro from question from Brian James. ahead.

Brian Vaccaro

and you, the level the weekly peak trends? evening. comment peak. sales you and certainly to that recent you X% Could is in say AWS the Jon, good the made around week down a was Thank did versus XX on clarify most you earlier XX recent

you're So XX,XXX recent in range in of kind the weeks.

Steve Hislop

peak It levels. weeks. X% was slightly from I under what XX,XXX But, referring to, our it's down in recent was that's yes,

Brian Vaccaro

Okay.

you're in you the Okay, down Ohio, could on Carolinas, key great. Texas, cetera? Kentucky, markets seeing on performance, Southeast what regional a And other drill further little et beyond

Steve Hislop

Yes.

too about XX% Kentucky capacity. really regional back we're nationwide. As go We kind but we really issue, you talk a did don't see seeing know, strong of to it much

However, a reduction really with sales we didn't much said, that being Kentucky. of overall see in in

another one. strong some through of states of regions. been that Ohio seeing areas, those is and Arkansas strong the Basically strong, kind of Tennessee, we're our have and some So, really

pretty it's consistent we're on throughout country the seeing. been So, what

Brian Vaccaro

can balance the the just rent that me. end repayment at last the what like was Okay. rent? quarter? remind one us Jon, you from deferred deferred And on of what the looks And timeline then,

Jon Howie

to And think end three two it next anywhere years. the basically go was to months the the I from of about quarter. million next the can $X.X at three that

we've the different now more associated quarter. got about XX bed. about second put agreements And So by that. to to the to XX finalize of of got finally then that that We the we've had got we've with finalized agreements end

Brian Vaccaro

Okay.

your one terms status that you when it on of closed, reopen sorry, And those that's you. more; the from or And the what's nine might are in units? Thank me. what's just radar stores

Steve Hislop

months, as the every mentioned Brian. the recent market to months Yes, and look has one some visit roughly competitive we closings, and single two what move store they'll environment, marketplace at I ago, next in a next to we're a going do Thank you. some a in the Thanks, Brian, probably couple as take is, going at over possibly that second the I'll look then I'm with reopen, the will the how changed reopen. forward, make determination seats of take

Brian Vaccaro

Thanks.

Steve Hislop

of fast I back rest on we're that the lease. it to allowed $X.X want of relief much really Brian, expense too because thing our changes in your to the that basically doesn't deferring just straight-lining come through million, mean rent because method the how they us those do the

significant even much very about see in rent shouldn't you our change So expense though deferred we $X.X million.

Brian Vaccaro

Yes. Understood, you. thank

Steve Hislop

Thank you.

Operator

Chris ahead. from Go O'Cull next is Stifel. question Our from

Chris O'Cull

two the to clarify to the for the July remaining you quarter, gave remain be weekly quarter, afternoon, similar periods in of July? you just periods if good the Hey, levels at in what margin wanted the average sales that sales guys. the Thanks. saw remaining of why wouldn't I two the

Steve Hislop

up open a as continuing we're dining as also, deferred maintenance as now off back from rooms. we're said last quarter, of then as we bunch that the because OpEx there an were well. getting cut we And to Well, standpoint back, some that services well

And remain coming going the as expenses back hurt have that online. several to margins the fixed online, that's down, sales if well. So, coming we've back got are the you expenses

Chris O'Cull

the you now? course you over to have the open do quarter dining more many rooms what than How have right expect of

Steve Hislop

can as XX%, those there XX%, the we are that we other extent, up. number nine some rooms of that get still what XX%, still dining well the extent to as standpoint. of can It's a labor at them opening back temporarily the than dining adding of maintenance to from the as we have to have not get to a capacity of And to our matter dining expenses room little the because a all closed extra procedures we as kind open rooms we're them are our we

Chris O'Cull

guys. Thanks great. Okay,

Steve Hislop

Chris. Thanks,

Operator

question-and-answer This the Steve to concludes now closing conference session. our over Hislop remarks. like for turn to I would

Steve Hislop

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

Operator

for presentation. Thank had today's conference The now you concluded. attending

disconnect. You may now

Chuy's (CHUY) 7 Aug 202020 Q2 Earnings call transcript