Fogo de Chão stands in a unique position to capitalize on the Olympic Games in Rio de Janeiro, the company said Tuesday.
Executives at the Dallas-based churrascarria chain, which was founded in Brazil in 1979, said they were “cautiously optimistic about potential upside” for the Summer Games’ impact on revenue.
“We have a flagship store on the beach in Botafogo Bay in Rio, and last year we opened a second store in Rio, in the Rio Baja area, which is near the Olympic Village,” said Larry Johnson, Fogo de Chão CEO, in an earnings call with analysts.
“We believe both stores are well-positioned to take advantage of that opportunity,” he said.
However, Johnson said the 42-unit chain faced the potential trade-off of seeing customers in the United States, where the company has 32 restaurants, staying home to watch the Rio Summer Games on television. The Olympics closing ceremony is on Aug. 21.
The Olympics are also in the same time zones as many U.S. markets for the first time in several quadrennial games, which means many viewers can watch them live.
“There is the potential impact of people watching at home and not necessarily going out to dinner,” said Barry McGowan, Fogo de Chão president.
“Regardless of the immediate impact,” Johnson added, “we are encouraged by the longer term halo of increased awareness of the Brazilian culture, people and cuisine due to the global media coverage. We also believe we will benefit from the direct brand awareness created by Fogo playing host to certain media segments.”
Brazil’s recession has impacted Fogo de Chão revenue. Traffic at the Brazil restaurants in the second quarter ended July 3 fell 9.9 percent, said McGowan.
Johnson said Brazil’s same-store sales dropped 4 percent in the quarter, “reflecting the macro-economic and geopolitical headwinds” in the country.
“Let's remember,” Johnson said, “we have a 36-year history in Brazil, and we have been through these cycles before. Our Brazil operation is a highly profitable business for us that generates strong cash flow, while providing us an authentic labor source for our U.S. and international joint ventures.”
Fogo de Chão systemwide same-store sales in the second quarter slipped 1.6 percent, with a 1.6-percent decline at U.S. restaurants, the company said Tuesday.
The chain, which went public in June 2015, reported an increase in net income of 144.5 percent in the second quarter, to $6.1 million, or 21 cents a share, from $2.5 million, or 10 cents a share, in the same period a year ago. Revenue rose 2 percent in the quarter, to $69.6 million, from $68.1 million in the prior-year period.
Analysts expected earnings per share in the second quarter of about 25 cents a share, as the company continued to promote its Sunday “Gaucho Lunch,” tested a Saturday brunch and considered extending its dinner hours as early as 2 p.m.
“The high-end steak category is also feeling competitive pressures being seen across the entire industry,” said Andy Barish, an analyst with Jefferies, in a note Wednesday.
“We applaud efforts around price optionality, daypart expansion and group sales, but not enough to combat [a] difficult external environment,” he wrote.
Fogo de Chão has 32 locations in the United States, 10 units in Brazil and one joint-venture restaurant in Mexico City.