Stock in Fogo de Chão Inc. surged nearly 10 percent on Wednesday after the Dallas-based Brazilian steakhouse chain beat investors’ sales and profits expectations.
The company said that U.S. same-store sales in the quarter ended Jan. 1 declined by 1 percent, and 2 percent chainwide. Investors had expected declines in the mid-single digits amid a weak casual-dining market.
For the year, same-store sales decreased 0.6 percent and traffic increased 0.5 percent at the Dallas-based chain. The traffic performance beat fine-dining restaurants by at least 160 basis points, based on indexes from Knapp Track and Black Box Intelligence.
“We believe this demonstrates our ability to generate traffic gains and take market share,” CEO Larry Johnson said on the company’s earnings call Tuesday.
Fogo has worked diligently to build traffic by giving consumers lower-cost options. The company started offering a Gaucho Lunch, for instance, which is a modified version of the chain’s experience at a lower price.
The company has also created a sales manager for each U.S. restaurants who could help build traffic. And it created a Brazilian Brunch on Saturdays and Sundays.
Barry McGowan, the Fogo de Chão’s president, said consumers are now visiting the chain 1.6 times per year, up from 1.4 two years ago. On a two-year basis, traffic is up 3.5 percent in the U.S.
“Our strategy is around daypart expansion, all-day value and innovation,” McGowan said. The strategy is designed to drive frequency over the long-term, he said.
Strong performance in the U.S. has offset weak performance in Fogo’s Brazil market, its second largest outside the U.S. Same-store sales declined 6.9 percent in the quarter there.
Revenues at the chain increased 4.4 percent in the quarter to $80.9 million, from $77.5 million.
Adjusted net income fell 3.8 percent to $8 million, or 28 cents per share, from $8.4 million, or 29 cents.
Fogo de Chão currently operates 47 restaurants, 10 of which are in Brazil, as well as two joint venture restaurants in Mexico City. The company expects to add three restaurants in 2017, and two joint venture restaurants in international markets.
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