Executives at Chuy’s Holdings Inc., a Mexican restaurant operator that went public in July, reported a large profit increase for the second quarter and said Wednesday that new-unit growth will drive profits in the years ahead.
In its first earnings call Wednesday as a public company, Chuy’s reported that profit in the second quarter, ended June 24, increased 156.8 percent to $1.7 million, from $674,000 in the prior-year period. Revenue rose 32 percent to $43.5 million, from $33 million in the same quarter last year.
Same-store sales among the comparable-unit base of 21 restaurants rose 1.9 percent. That total increase included a 1.6-percent increase in average check and a 0.3-percent increase in traffic, said Jon W. Howie, Chuy’s chief financial officer, during the call.
On July 27, Austin, Texas-based Chuy’s Holdings completed its initial public offering at $13 a share; shares closed Wednesday at $19.25. The company received net proceeds from the offering of about $79.4 million after commissions and expenses. Executives said most of those proceeds were used to repay loans and outstanding debt under the credit facility after the repayment was about $5 million.
Future earnings growth “will be largely driven by new unit growth and the efficiencies of that growth over the next five years,” said Steve Hislop, president and chief executive of Chuy’s Holdings.
“We believe the broad appeal of Chuy’s concept, our historical unit economics and flexible real-estate strategy, combined with our modest store base, present us with a large runway of opportunity for continued expansion,” Hislop. The company expects to open 50 to 55 units in the next five years, he said.
With six new restaurants added this year, the Chuy's casual-dining chain currently includes 37 units. The company is scheduled to open its seventh new store of this year in Lubbock, Texas, in September and the eighth new unit in Florence, Ky., in November, Howie said. The company opened three of its new units in the second quarter: Opry Mills, Tenn.; Bowling Green, Ky.; and Norman, Okla.
Hislop said the newer stores are seeing sales above projections, adding: “I’m liking how they are moving.” The company is cross-training staff in the Southeast market to provide a second team to open new restaurants, he said.
Uncertainty about commodity-price increases remains on the horizon, Chuy’s executives said, adding that inflation was modest in the second quarter. “What we’ve seen in the last half of the quarter is inflation starting in chicken and produce,” Howie said. “And we’re seeing that continue into the third quarter.”
Chuy’s has about 15 percent to 17 percent of commodities contracted through the end of the year. Howie said he expects inflation in the last half of the year to be in the 4- to 5-percent range.
Hislop emphasized that Chuy’s works to keep value in the menu, with only three of 49 menu items priced above $10.
Over the past five years, Chuy’s has averaged about 1.5-percent price increases annually, Hislop said. “And that’s what we’re looking toward now with the intel we have,” he added.
In price increases for the year ahead, Hislop said, “We’re still looking at, probably as of now, about 1.5 percent. We feel that’s sufficient. We’re probably a little early. You’ll probably start hearing all the big jumps and estimates starting in October.”
Chuy’s owns and operates restaurants in eight states.