CHUY | COVERING THE SHORT

CHUY is on the Hedgeye Restaurants Best Ideas list as a SHORT. Coming out of this strong quarter, and improved guidance we are taking it off the list and covering the short.

 

Last night Chuy’s Holdings (CHUY) reported their 2Q 2015 results. Comparable same-store sales (SSS) for the quarter were 3.2% versus consensus estimates of 2.8%, representing an 80 basis improvement YoY. The increase in SSS were driven by a 3.9% increase in average check offset by a -0.7% decrease in traffic, representing 652 fewer guests.  Revenue increased 19.1% to $75.4mm topping consensus estimates of $73.4mm.  Net income increased 55.9% to $5.4mm or $0.32 per diluted share versus consensus estimates of $4.2mm or $0.25 per diluted share.

 

CHUY | COVERING THE SHORT - CHUY CHART 1

CHUY | COVERING THE SHORT - CHUY CHART 2

 

During the quarter the company opened one new Chuy’s restaurant in Dayton, Ohio, for a total of five to date in the year. The company remains on track to open 10-11 new restaurants in the full year 2015. Management is focused on penetrating higher growth markets such as the Chicago area and Florida, as they continue to backfill existing markets.

 

CHUY’s had robust margin improvement driven by productivity initiatives being implemented faster than anticipated. The new stores seem to be ramping up well, as management is getting better at opening stores more efficiently each year. As you see in the chart below, they have been driving costs out of the business, and improving margins

 

CHUY | COVERING THE SHORT - CHUY CHART 3

 

Management improved guidance for the full year 2015, now expecting EPS in the range of $0.82 to $0.85 versus the previous range of $0.76 to $0.79. Built by the main assumption that same-store sales will grow at 2.5% for the remainder of the year.

 

For now we will stop chasing this name as a SHORT, but there may be a time in the future we revisit the possibility.


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