Chuy's Holdings, Inc. is a rapidly growing full-service restaurant concept offering a distinct menu of authentic, freshly-prepared Mexican and Tex-Mex inspired food. Founded in 1982 in Austin, Texas, the company has expanded to 102 restaurants across 16 states as of March 31, 2023. Chuy's is committed to providing value to its customers through offering generous portions of made-from-scratch, flavorful Mexican and Tex-Mex inspired dishes, as well as a full-service bar in all of its restaurants.
Financials
The company's strong performance is reflected in its financial results. In fiscal year 2023, Chuy's reported annual revenue of $461.31 million and net income of $31.51 million. The company also generated robust operating cash flow of $59.08 million and free cash flow of $20.47 million during the year.
Looking at the first quarter of 2024, Chuy's reported revenue of $110.5 million, down 1.8% from the comparable period in 2023. This decrease was primarily related to a 4.3% decline in comparable restaurant sales, partially offset by incremental revenue from new restaurants opened during and subsequent to the first quarter of 2023. The company's off-premise sales, which include delivery and catering, continued to grow, accounting for 29% of total revenue in the quarter compared to 27% in the prior year period.
Despite the top-line challenges, Chuy's maintained strong profitability, with a restaurant-level operating margin of 18.8% in the first quarter. The company was able to offset higher labor and operating costs through effective cost management and operational excellence. Net income for the quarter was $6.92 million, or $0.40 per diluted share, compared to $8.22 million, or $0.45 per diluted share, in the same period last year.
Outlook
Chuy's management team remains optimistic about the company's long-term growth prospects. The company is focused on driving sales through menu innovation, expanding its off-premise offerings, and strategic marketing initiatives. In the first quarter, Chuy's introduced new Craveable Kitchen Offerings (CKOs), including shrimp and crab enchiladas, Machos nachos, and a cheesy Pig Burrito, which have been well-received by customers. The company also continues to optimize its menu by adding popular CKOs as permanent items.
The company's off-premise business, which includes delivery and catering, remains a key growth driver. Delivery sales accounted for approximately 12% of total revenue in the first quarter, up 130 basis points year-over-year. Chuy's is also focused on building awareness around its catering capabilities and rolling out its ezCater platform to all of its restaurants.
Chuy's marketing approach has been effective in communicating the brand's unique value proposition and sharing its "unchained" dining experience with customers. The company utilizes digital media platforms such as Meta, Google, TikTok, and YouTube to showcase its made-from-scratch food and drink offerings.
Recent Developments
On the development front, Chuy's opened one new restaurant in the first quarter of 2024 and an additional restaurant subsequent to the end of the quarter. The company plans to open between 6 to 8 new restaurants in its core markets for the full year 2024, in line with its long-term growth strategy.
Liquidity
Chuy's strong balance sheet and liquidity position provide the company with the financial flexibility to execute its growth plans. As of March 31, 2024, the company had $56.4 million in cash and cash equivalents, no debt, and $25 million available under its revolving credit facility. During the first quarter, Chuy's repurchased 214,659 shares of its common stock for approximately $7.3 million, underscoring its commitment to creating shareholder value.
Looking ahead, Chuy's management has reaffirmed its adjusted earnings per share guidance of $1.82 to $1.87 for fiscal year 2024. This guidance is based on the company's expectations for G&A expenses of $29 million to $30 million, 6 to 8 new restaurant openings, net capital expenditures of $41 million to $46 million, restaurant pre-opening expenses of $2.7 million to $3.2 million, an effective annual tax rate of 13% to 14%, and annual weighted diluted shares outstanding of 17.4 million.
Conclusion
Chuy's strong brand, operational excellence, and disciplined growth strategy position the company well for continued success in the years ahead. With a focus on menu innovation, off-premise expansion, and strategic marketing, Chuy's is poised to capitalize on the growing demand for authentic Tex-Mex cuisine and deliver value to its shareholders.