CHUY | SOMETIMES YOU NEED TO KNOW WHEN TO WALK AWAY

We are removing Chuy’s Holdings (CHUY) from our Hedgeye Restaurants Best Ideas list as a SHORT.

 

HEDGEYE OPINION

Last night CHUY reported 4Q15 and full year earnings results that beat our expectations as well as consensus expectations. In addition, their guidance looking out into 2016 and beyond was relatively in line with consensus. A core aspect to our short thesis was a continuing decline in traffic due to their pricing, and heavy concentration in Texas, specifically oil markets such as Houston and San Antonio. Although management spoke to softening in these regions it was not enough to greatly affect the overall business. Sometimes you need to know when to walk away, and this is that time for us, we are removing it from our list altogether, and will watch this one from the sidelines.

 

4Q15 RESULTS

CHUY reported revenue of $71.0 million, slightly beating out estimates of $70.4 million. Same-store sales growth in the quarter was +3.2%, handily beating consensus estimates of +2.8%. The comp was entirely built up by price, as traffic was flat in the quarter. Earnings per diluted share was $0.18 in 4Q15 versus consensus estimates of $0.13.

 

DEVELOPMENT

During 4Q15, four new Chuy's restaurants were opened - in Tuscaloosa, Alabama; Columbus and Beavercreek, Ohio; and Orlando, Florida, which was right on par with consensus estimates. Subsequent to the end of the fourth quarter, one additional Chuy's restaurant was opened inWoodbridge, Virginia.

MANAGEMENT GUIDANCE

The company expects 2016 EPS to be between $1.01 and $1.05, current consensus estimates were pegged at $1.03 for full year 2016. Management expects comparable restaurant sales growth of approximately 2.0%, slightly below consensus estimates of 2.6%.  And the company intends to open 11 to 13 new restaurants in the quarter, which is in line with current consensus projections of 12 new restaurants in 2016.

 

Please call or e-mail with any questions.

Howard Penney

Managing Director

Shayne Laidlaw

Analyst