Chuy's Holdings, Inc. (CHUY) Q4 2022 Earnings Call Transcript

Chuy's Holdings, Inc. (NASDAQ:CHUY) Q4 2022 Earnings Conference Call February 16, 2023 5:00 PM ET

Company Participants

Jon Howie - Vice President & Chief Financial Officer

Steve Hislop - President, Chief Executive Officer & Chairman of nan Board

Conference Call Participants

Mary Hodes - Baird

Operator

And invited to nan Chuy's Holdings Fourth Quarter 2022 Earnings Conference Call. Today's telephone is being recorded. At this time, each participants person been placed successful a listen-only mode and nan lines will beryllium unfastened for your questions pursuing nan prepared remarks.

On today's telephone we person 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 move nan telephone complete to Mr. Howie. Please spell up sir.

Jon Howie

Thank you, usability and bully afternoon. By now, everyone should person entree to nan 4th fourth 2022 net release. If not, it tin beryllium recovered connected our website astatine chuys.com successful nan Investors section.

Before we statesman our general remarks, I request to punctual everyone that portion of our discussions coming will see forward-looking statements. These forward-looking statements are not a guarantee of early performance, and therefore, you should not put undue reliance connected them. These statements are besides taxable to galore risks and uncertainties that could origin existent results to disagree materially from what we expect. We mention each of you to our caller SEC filings for a much elaborate chat of nan risks that could effect our early operating results and financial condition.

With that retired of nan way, I'd for illustration to move nan telephone complete to Chuy's President and CEO, Steve Hislop.

Steve Hislop

Thank you, Jon. Good afternoon, everyone and convey you for joining america connected our 4th fourth net telephone today. We're proud of our beardown results for the 4th driven by integrated top-line maturation and sustained operational efficiencies. Such was complemented by our continued superior return to shareholders done our stock repurchases enabled by nan ongoing spot of our operating model.

During nan 4th quarter, we saw beardown comparable income maturation crossed each periods and importantly our momentum has continued into January. We judge our caller made-from-scratch nutrient and drinks astatine an unthinkable worth proceed to resonate pinch our guests and are nan driving unit down our maturation sloppy of really our guests take to entree nan brand.

Turning to our maturation drivers. We'll commencement pinch paper innovation. As we noted past call, we launched our first ever constricted clip connection level Chuy's Knockouts successful October. Chuy's Knockouts done quarterly specials introduced to our guests to breathtaking caller paper innovation, while besides reintroducing our guests to aged favorites for a constricted time. We scheme to connection Chuy's Knockouts erstwhile per 4th for a six-week play of time.

I'm thrilled to study that our first CKO drove incremental postulation and mixed astatine astir 2.5% of each entrees sold during nan six-week period. Importantly, we did not spot user request way disconnected successful nan second weeks of nan CKO play arsenic you do pinch galore constricted clip offers and frankincense giving america accrued assurance successful nan level longer term. That said, while these results are encouraging nan CKO level is still caller to nan marque and we intend to proceed to reiterate and research pinch nan level to find what resonates champion pinch our guests successful nan long-term.

Following nan occurrence of our first CKO, precocious January saw a return of our instrumentality favourite Veggie Enchiladas arsenic good arsenic an preamble of our caller Wild Burrito and Hatch Beef Tacos. While we are only 3 weeks into nan CKO period, we're excited astir nan results we've seen frankincense far.

Next we will move to off-premise. Our momentum continued pinch nan maturation of our off-premise, which represented astir 29% of full income for this quarter. The transportation transmission helped thrust our off-premise maturation arsenic consumers embraced nan opportunity to bask Chuy's high-quality made-from-scratch nutrient from nan comfortableness of their ain home.

We besides proceed to capable retired our existing catering markets and person further opportunities to grow successful respective different caller markets successful 2023 to complete nan rollout of nan catering programme system-wide. Catering represented almost 4% of our 4th fourth income and astir 2.6% of our yearly sales. We proceed to judge that off-premise will correspond a debased to mid-20s of our income complete clip pinch catering contributing astir 4% to 6%.

Finally successful position of our trading initiatives, we proceed to put dense accent connected integer media, including nan usage of TikTok, integrated influencer programs connected Instagram, YouTube video advertizing and a promotional advertizing business pinch DoorDash.

These initiatives person allowed america to efficaciously pass our defining differences from our made-from-scratch nutrient and drinks offered astatine an unthinkable worth to our recently introduced CKO offerings and nan unsocial wide acquisition astatine each Chuy's restaurant. Along pinch our caller website we judge these initiatives will thief america to amended link pinch some caller and returning guests.

Moving to profitability. Our ongoing attraction connected operational efficiencies and costs guidance resulted successful a beardown 17% restaurant-level operating margin, representing a 270 ground constituent betterment complete 2019. We achieved these results contempt double-digit commodity ostentation and high-single-digit labour inflation.

Looking astatine 2023, astatine nan extremity of January took astir 3.5% pricing. We judge this is an due level to equilibrium our beardown worth proposition to our consumers arsenic good arsenic solidifying our separator profile. We person not made immoderate decisions connected immoderate further pricing actions for nan twelvemonth and will reevaluate arsenic basal fixed nan macro environment.

Lastly, earlier I move nan telephone complete to Jon, fto maine update you connected our improvement plan. During nan 4th quarter, we successfully opened 2 caller restaurants successful our halfway markets of Texas and Tennessee bringing connected our full improvement to 3 restaurants during nan year. We besides closed 1 edifice astatine nan extremity of its lease word arsenic we person already developed different edifice successful a much desirable location for nan waste and acquisition area. In total, we had 98 restaurants astatine nan extremity of fiscal year.

As we look ahead, we are excited astir nan integrated maturation opportunities up for nan marque done accelerated portion description . For 2023, we've developed a robust pipeline now consisting of six to 7 caller restaurants, focused connected markets wherever our conception is proven pinch precocious AUVs and marque awareness. This includes our Fayetteville, Arkansas restaurant, which is slated to unfastened successful precocious February, early March.

With that, I will now move nan telephone complete to our CFO, Jon Howie to talk our 4th fourth results successful greater detail.

Jon Howie

Thanks Steve. And revenues for nan 4th fourth accrued 5.5% to $104.1 cardinal compared to $98.7 cardinal successful nan aforesaid 4th past year. The summation was chiefly related to betterment successful our comparable edifice income arsenic good arsenic an further 22 operating weeks from caller restaurants opened consequent to nan 4th fourth of 2021. In total, we had astir 1,269 operating weeks during nan 4th fourth of 2022 and off-premise income were astir 29% of full revenue.

Comparable edifice income successful nan 4th fourth accrued 3.4% versus past year, chiefly driven by a 6.1% summation successful mean check, partially offset by a 2.7% alteration successful mean play customers. Effective pricing during nan 4th was conscionable awkward of 7%. Compared to 2019, comparable edifice income accrued 3.1%.

Turning to expenses. Cost of income arsenic a percent of gross accrued 170 ground points to 27.5%, driven by an summation successful nan costs of beef and chickenhearted arsenic good arsenic caller nutrient food and market items. Overall, commodity ostentation during nan 4th was successful statement pinch our expectations astatine astir 15% and partially offset by paper value taken during nan year.

Based connected nan existent marketplace condition, we are presently expecting commodity ostentation of mid-single-digits for fiscal 2023 pinch high-single-digits for nan first quarter. Labor costs, arsenic a percent of revenue, accrued astir 140 ground points to 30.5%, chiefly owed to hourly labour ostentation of astir 9%, astatine comparable restaurants arsenic good arsenic an betterment successful our hourly staffing levels arsenic compared to past year.

This was partially offset by paper value increases taken during nan year. We are presently expecting hourly labour complaint ostentation of mid-single-digits for fiscal 2023 pinch a high-single-digit ostentation for nan first quarter, successful summation to a continuation of year-over-year staffing level increases.

Operating costs arsenic a percent of gross accrued 120 ground points to 16.6%, owed to higher transportation charges and to-go supplies arsenic good arsenic continued inflationary unit connected different operating expenses including summation successful inferior cost, edifice repair and attraction costs, security premiums and in installments paper fees.

Marketing expenses, arsenic a percent of revenue, accrued 40 ground points to 1.4% arsenic nan institution reinstated integer advertizing nationwide. Our occupancy costs arsenic a percent of gross decreased 30 ground points to 7% arsenic a consequence of income leverage connected fixed occupancy costs.

General and administrative expenses accrued $6.5 cardinal successful nan 4th fourth from $6.1 cardinal successful nan aforesaid play past year, driven by higher guidance salaries arsenic good arsenic an summation successful nationalist institution and recreation cost. As a percent of gross G&A held dependable astatine 6.2%.

In summary, nett income for nan 4th fourth of 2022 was $2.5 cardinal aliases $0.14 per diluted stock compared to $6 cardinal aliases $0.30 per diluted stock successful nan aforesaid play past year.

During nan 4th fourth of 2022, we incurred $3.2 cardinal aliases $0.14 per diluted stock successful impairment closed restaurants and different costs compared to $2.5 cardinal aliases 10% per diluted stock successful nan aforesaid play past year. The summation was chiefly related to a non-cash nonaccomplishment connected long-lived assets of an underperforming restaurants partially offset by a simplification successful rent paid connected antecedently closed restaurants. Taking that into relationship adjusted nett income for nan 4th fourth of 2022 was $5 cardinal aliases $0.27 per diluted stock compared to $7.9 cardinal aliases $0.40 per diluted stock successful nan aforesaid play past year.

Moving to our liquidity and equilibrium sheet. As of nan extremity of nan quarter, we had $78 cardinal successful rate and rate equivalents, nary indebtedness and $35 cardinal of readiness from our in installments facility. As we mentioned connected our past call, during nan 4th fourth of 2022, we purchased astir 327,000 shares of our communal banal for a full of $7.8 cardinal and completed our existing $50 cardinal repurchase program.

In conjunction pinch that, nan Board has besides approved a caller stock repurchase programme effective October 27, 2022 pinch an authorization to repurchase different $50 cardinal of our communal shares. As of December 25, 2022, nan institution had $50 cardinal remaining nether that caller program. We judge this further demonstrates nan spot of our financial position and our ongoing committedness to semipermanent shareholder value.

Turning to our 2023 outlook, we are presently expecting adjusted EPS of $1.60 to $1.65 per share, which includes an estimated $0.08 to $0.10 per stock affirmative effect to nan 4th fourth of 2023, containing 14 weeks versus nan normal 13 weeks successful fiscal 2022. This is based successful portion connected nan pursuing yearly assumptions.

G&A expenses of $28 cardinal to $29 million, six to 7 caller restaurants, nett superior expenditures of astir $35 cardinal to $39 million, edifice pre-opening expenses of astir $2.5 cardinal to $3 million, effective yearly complaint of -- effective yearly taxation complaint of astir 13% and yearly weighted diluted shares outstanding of 18.1 cardinal to 18.2 cardinal shares.

With that, I'll move nan telephone backmost complete to Steve.

Steve Hislop

Thanks Jon. We judge our business fundamentals stay strong. This mixed pinch our attraction connected four-wall operational excellence person positioned our institution to capitalize connected our affirmative momentum and nan immense opportunities up of us. Together pinch our disciplined superior allocation and accelerated portion maturation plan, we judge we've put Chuy's connected a way to maximize shareholder worth successful 2023 and beyond.

With that, we are happy to reply immoderate questions. Operator, please unfastened nan statement for questions.

Question-and-Answer Session

Operator

Thank you. We will now beryllium conducting our question-and-answer session. [Operator Instructions] We person a first mobility from nan statement of Mary Hodes pinch Baird. Please spell ahead.

Mary Hodes

Good day and acknowledgment for taking nan question. First, would you beryllium consenting to stock a circumstantial update connected really comps person tracked to day successful Q1? It seems for illustration nan broader manufacture indicators person improved and your prepared remarks suggested you whitethorn person knowledgeable that arsenic well. But wondering if you'd beryllium consenting to stock a circumstantial update connected nan quarter-to-date comp?

Steve Hislop

Well, I deliberation pinch everybody else, I mean we're rolling complete nan Omicron. So, yes, I mean successful nan first period, they were up double digit conscionable because we're rolling complete that Omicron.

Jon Howie

Yeah. And successful nan 2nd period, we ran complete a small spot of weather, though we did person a small upwind we ran complete a overmuch worse a twelvemonth ago.

Steve Hislop

But they're coming backmost to line…

Jon Howie

Yeah.

Mary Hodes

Yes, it makes sense. And past would you besides beryllium consenting to stock what you're assuming for same-store income successful nan 2023 outlook that you provided?

Jon Howie

Not astatine this time.

Mary Hodes

Okay.

Jon Howie

It'd beryllium successful nan debased azygous digits, debased to mid-single digits.

Mary Hodes

Thank you. And past based connected nan expected costs ostentation you laid retired nan mid-single digits successful pricing, I guess, really are you reasoning astir edifice margins, really that shapes up successful 2023 astatine that level of comp? I deliberation you antecedently talked astir returning to delivering that 300 to 350 ground points successful nan 2nd half of nan year. Does that still look for illustration it could beryllium possible?

Jon Howie

In nan 2nd half of nan year, yes, I mean we're looking astatine ostentation for illustration we said successful our remarks, particularly successful costs of income and besides labour up into nan precocious azygous digits and that to benignant of reside down successful nan backmost half of nan year. So, we're looking astatine labour and costs of income successful benignant of that mid-single digit. So fixed benignant of what we're talking astir successful value increase, we're looking astatine margins that are level to down, if we tin get a small higher income we could spot immoderate leverage.

Steve Hislop

Yes.

Mary Hodes

Okay. Great. That’s each from us. Thank you.

Jon Howie

Thank you.

Operator

Thank you. [Operator Instructions] We person a adjacent mobility from nan statement of Chris O'Cull pinch Stifel. Please spell ahead.

Unidentified Analyst

Hi. This is Zaki [ph] connected for Chris. Thanks for taking nan question. Just a speedy question. It looks for illustration you lowered nan apical extremity of your portion adhd guidance for 2023. Could you conscionable springiness america immoderate colour connected what drove that determination and what style you expect nan openings to return passim nan year?

Jon Howie

Yes. Well, I deliberation complete nan past 2 quarters, we've ever said successful that six-plus class and we ever said we were very comfortable connected nan debased extremity of that scope successful that six to 7 range. Taking a look astatine what we've dealt with, pinch nan proviso concatenation and permitting and clip spent conscionable waiting for things to get there. And specifically, nan summation successful building costs successful that 20% to 25% range, we thought it was prudent to push immoderate of them back. Although, arsenic you look astatine immoderate of nan openings this year, you'll spot a beautiful balanced onslaught passim nan twelvemonth of our openings quarter-to-quarter. So they'll beryllium beautiful evenly done. But mostly, it's conscionable nan permitting, nan proviso chain, and honestly nan existent costs that we do expect to spot immoderate alleviation successful nan 2nd half of nan year.

Unidentified Analyst

Understood. Thank you. And different mobility is I admit nan guidance connected benignant of your commodity ostentation outlook. Could you fto america know, what circumstantial commodities you're benignant of contemplating erstwhile it comes to perchance taking pricing aliases thing extracurricular of commodities that mightiness thrust your decision-making there?

Jon Howie

Well, correct now, arsenic we mentioned successful our book and truthful distant that we've already taken astir about 3 -- astir 3.5% value astatine nan opening of our 2nd play of nan year. Right now, I contemplating that being our value summation for nan twelvemonth unless thing goes benignant of crazy passim nan remainder of nan year, which we don't expect astatine this peculiar time.

Unidentified Analyst

Got it. Thank you, truthful much.

Jon Howie

You’re welcome.

Operator

Thank you. [Operator Instructions] As location are nary further questions from nan participants astatine this time, I'd for illustration to move nan level backmost complete to Steve Hislop, CEO for closing comments. Over to you sir.

Steve Hislop

Thank you. Thank you, truthful much. Jon and I admit your continued liking successful Chuy's and are disposable to reply immoderate and each questions. And again, convey you and person a bully evening.

Operator

Thank you. Ladies and gentlemen, this concludes today's teleconference. You whitethorn disconnect your lines astatine this time. Thank you for your participation.