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Edited Transcript of CHUY earnings conference call or presentation 8-May-18 8:30pm GMT

Q1 2018 Chuy's Holdings Inc Earnings Call

Austin Dec 13, 2018 (Thomson StreetEvents) -- Edited Transcript of Chuy's Holdings Inc earnings conference call or presentation Tuesday, May 8, 2018 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jon W. Howie

Chuy's Holdings, Inc. - VP & CFO

* Steven J. Hislop

Chuy's Holdings, Inc. - President, CEO & Director

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Conference Call Participants

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* Andrew Marc Barish

Jefferies LLC, Research Division - MD and Senior Equity Research Analyst

* Andrew Strelzik

BMO Capital Markets Equity Research - Restaurants Analyst

* Brian Michael Vaccaro

Raymond James & Associates, Inc., Research Division - VP

* David E. Tarantino

Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst

* Jeffrey Daniel Farmer

Wells Fargo Securities, LLC, Research Division - MD and Senior Restaurant Analyst

* Jonathan Clifton Conley

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Nerses Setyan

Wedbush Securities Inc., Research Division - SVP of Equity Research and Equity Analyst

* William Everett Slabaugh

Stephens Inc., Research Division - MD

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Presentation

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Operator [1]

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Good day, everyone, and welcome to the Chuy's Holdings, Inc. First Quarter 2018 Earnings Conference Call. Today's call is being recorded. (Operator Instructions) On today's call, we have Steve Hislop, President and Chief Executive Officer; and Jon Howie, Vice President and Chief Financial Officer of Chuy's Holdings, Incorporated. At this time, I will turn the conference over to Mr. Howie. Please go ahead, sir.

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [2]

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Thank you, operator, and good afternoon.

By now, everyone should have access to our first quarter 2018 earnings release. It can also be found on our website at www.chuys.com in the Investors section.

Before we begin our review of formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions.

With that out of the way, I'd like to turn the call over to Steve.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [3]

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Thank you, John, and thank you to everyone for joining us on the call today. Let me start with an overview of our first quarter results, then discuss the progress and our strategic initiatives for the year. Afterwards, Jon will review our first quarter financial results in greater detail.

At a higher level, revenues for the first quarter of 2018 grew 8% compared to last year. The increase was led by sales of new unit growth, partially offset by a 1.5% decrease in comparable restaurant sales on a fiscal basis. Net income for the first quarter was $3.2 million or $0.19 per diluted share.

Our first quarter results reflected the challenges of multiple weather interruptions and negative impact from the timing of Easter and the loss of the week after Christmas, which is our highest volume and most profitable week of the year. We were also impacted by ongoing industry labor pressures. Despite these challenges, our results were largely in line with our expectations and we are reaffirming our earnings per share guidance for the year.

We remain focused on our core fundamentals of taking care of our guests, whether it's our hand-rolled tortillas, our daily made homemade sauces made from scratch food or hand-squeezed lime juice for our signature margaritas, our primary goal is to provide exceptional service standards for our guest in a unique and upbeaten atmosphere. To improve upon our profitably going forward, we laid out several initiatives on our last call, I'd like to provide some updates on that.

Let's start with our marketing effort. We're in the final stages of selecting a full-time marketing firm to help us bring our local store marketing and social media campaigns to a new level. We are excited about the prospect of improving our brand awareness and value messaging in both current and new markets.

On the technology front, our partnership with Olo to create a robust online ordering system is progressing very well. We are currently expecting to test the system in the second quarter and plan on completing system-wide rollout by early in the third quarter. Early feedback has been tremendously positive and we look forward to using our online ordering platform as a stepping stone for the introduction of new loyalty program in the future.

Turning to catering. Our test in Nashville, Dallas and Houston markets continue to perform well. We are now considering additional markets of possible expansion during the next year.

Lastly, with regard to our labor initiatives, we are in the last stages of integrating our new labor management tool with our POS system and expect to complete this integration in the second quarter.

On development front, we opened 2 Chuy's restaurants during the first quarter, one in Doral, Florida and one in Orland Park, Illinois. Subsequent to the end of the first quarter, we've opened additional restaurants in Lakewood, Colorado and New Tampa, Florida. While it's early, we're pleased with the performance of these new restaurants as our operators and development team continue to do an excellent job of instilling the Chuy's culture in our new units. For 2018, we expect to open between 8 and 12 units.

In summary, we continue to believe in the broad appeal of the Chuy's concept. Our strong unit economics and flexible real estate strategy, our strong balance sheet also enabled us to return excess capital to our shareholders, most recently through our share repurchase during the first quarter. All in all, we believe we have a long runway for expanding the Chuy's brand in 2018 and beyond.

With that, I'd like to turn the call over to our CFO, Jon Howie, for a more detailed review of our first quarter results.

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [4]

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Thanks, Steve. Revenues increased 8% year-over-year to $93.9 million for the first quarter ended April 1, 2018, driven primarily by $9.4 million in incremental revenue from an additional 135 operating weeks produced by 13 new restaurants opened during and subsequent to the first quarters for the last year. This increase was partially offset by the $1.4 million headwind related to our 1 week calendar shift due to the 53rd week in fiscal 2017 as well as noncomparable restaurants that are not included in the incremental revenue above.

We had a total revenue of approximately 1,187 operating weeks during the first quarter of 2018. On a fiscal calendar basis, comparable restaurant sales decreased 1.5% for the 13-week period ended April 1, 2018, compared to the 13-week period ended March 26, 2017.

On a calendar basis, which we believe is more reflective of the year-over-year change in this business, comparable restaurant sales decreased 0.6% for the 13-week period ended April 1, 2018, compared to the 13-week period ended April 2, 2017. We estimate the comparable sales were negatively impacted by unfavorable weather conditions of about 130 basis points, by the shift of Easter to the first quarter of this year by about 20 basis points, and by strategic cannibalization of about 20 basis points. Average weekly customers declined 2.4%, partially offset by a 1.8% increase in average check. Effective pricing during the quarter was approximately 1.8%. There were 74 restaurants in our comparable base at the end of the first quarter of 2018.

Turning to a discussion on selected expense line items. Cost to sell as a percentage of revenue remained flat at 25.1%.

Looking forward to the rest of 2018, we continue to expect inflation for the year to be in that 1% to 2% range, similar to 2017, with higher inflation rates in the first half of the year or lower in the last part of the year.

Labor cost as a percentage of restaurant revenue increased approximately 150 basis points to 35.7%. The increase was attributable to hourly labor rate inflation of approximately 2.8%, new store labor inefficiencies and higher hourly rates in new markets. For 2018, we continue to expect labor inflation to be approximately 3%. Restaurant operating costs as a percentage of revenue increased 30 basis points to 14.2%, primarily due to higher utility costs and higher repairs and maintenance cost. Occupancy cost, as a percentage of revenue, increased 60 basis points to 7.6%, primarily due to the higher rental expense at certain newly opened restaurants as we continue to expand into larger markets and higher rents on extended lease terms of certain existing restaurants.

General and administrative expenses increased approximately $0.6 million to $5.5 million in the first quarter, driven primarily by higher management salaries and benefits to support our store growth as well as increases in our professional fees, now that we are required to have our system of internal controls audited. As a percentage of revenue, SG&A increased approximately 20 basis points year-over-year to 5.8%.

In summary, net income for the first quarter of 2018 was $3.2 million or $0.19 per diluted share compared to $4.6 million or $0.27 per diluted share in the year ago period. During the first quarter, the company repurchased 64,757 shares of common stock for $1.6 million. We ended the quarter with $8.4 million of cash on the balance sheet and we currently have no debt.

Lastly, let me go through our outlook for 2018, which has largely remained unchanged from what we disclosed on our last call. We continue to expect 2018 diluted earnings per share of $1.12 to $1.16. This compares to our 2017 adjusted earnings per share of $0.89, excluding the benefit of the extra week. Our guidance is based on the following assumptions: we expect comparable restaurant sales growth of approximately 1% on a 52-week fiscal basis at the lower end of our previous range of 1% to 1.5%; we expect restaurant preopening expenses of approximately $3.7 million to $5.5 million; we expect G&A expenses between $21 million and $21.8 million.

As a result of the enactment of the Tax Act, our effective tax rate is expected to be between 13% and 14%. With the savings from this reduction in rate, we intend to invest approximately $1.5 million or approximately 40 basis points during 2018 into national-level marketing and off-premise initiatives, including to-go packaging, on-line ordering and catering. We expect annual weighted average diluted shares outstanding of 17.1 million to 17.2 million shares, and we expect to open 8 to 12 new Chuy's restaurants this year.

Lastly, our capital expenditures, net of tenant improvement allowances are projected to be between $30 million and $40 million.

With that, I'll turn the call back over to Steve to wrap up.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [5]

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Thanks, Jon. The broad appeal of Chuy's concept provide us with many opportunities to bring high-quality made from scratch food offerings and hand-crafted cocktails to both new and returning guests. While external environments remain challenging, we're confident that the initiatives we laid out will benefit us in the long run. Of course, our focus on the core fundamentals will not be possible without the hard work and dedication of our employees. And we would like to thank them again for all of their efforts in making our brand unique. With that, we are happy to answer any questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will take our first question from David Tarantino with Baird.

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David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [2]

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A couple of questions on the recent same-store sales trends. I think based on what you've shared when you reported Q4 results, it seems like trends may have picked up in the latter month of the quarter. And I was just wondering if you could, one, confirm that and then talk about what you're seeing so far in the second quarter. And then, I have a couple of follow-ups.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [3]

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Yes, David, thank you for the question. Yes, it did pick up later in the quarter, and it's continuing into the fourth period as well. So it's definitely picked up a little bit. Take away the noise of the weather.

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David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [4]

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And Steve, would you be willing to share what you're seeing quarter-to-date on comp?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [5]

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It's roughly in that 1.5% range, right there. And again, we had a little bit of noise with some weather of about 40 basis points in the fourth period also, which has included that number.

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David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [6]

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And does that included the benefit that you have from Easter in that quarter to those areas?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [7]

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Yes. Yes. It does.

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [8]

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The negative 40 basis points that he's talking about also includes the positive on the Easter.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [9]

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Absolutely.

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David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [10]

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Got it. Okay. And then, I guess, given that trends have picked up here recently, I wanted to ask why you decided to trend the full year comp guidance to the low end of the range versus keep supply range. I just wanted to sort of understand what happened in your mind that changed that outlook...

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [11]

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First quarter?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [12]

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Down in the first quarter? Yes, I guess that we were expecting a little bit more to come back in the first quarter, but we're down 1.5% on a fiscal basis because again, David, those are fiscal numbers, which are going to be about 30 basis points below our normal kind of operational comp number.

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David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [13]

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Understood. Okay. So just to be clear, it's all -- the change in the outlook for the year is more of a function of the backward-looking results as opposed to a change in your view on the forward-looking?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [14]

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Right.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [15]

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Yes, absolutely.

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [16]

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Yes, so -- I mean, just to give you an update on that. So we're looking at -- if you saw the difference between the fiscal and the calendar, we're about 90 basis points negative on the fiscal. We're going to be flat in the second quarter on that difference, and then we'll be down about 90 basis points again in the third quarter and then up about 40 or 50 basis points in the fourth quarter, which will result based upon the weighing of those quarters about -- down about 30 basis points from our fiscal. I mean, from our comp to our fiscal.

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David E. Tarantino, Robert W. Baird & Co. Incorporated, Research Division - Associate Director of Research and Senior Research Analyst [17]

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Okay. Great. That's helpful. And then Jon, can you maybe just talk about what you're seeing underneath the surface on new unit productivity. I guess, the way we calculate it, it looks a little soft in Q1. So I was wondering if you could just comment on the class of openings from 2017? And what you've opened so far this year and how those are performing relative to your internal target?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [18]

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Yes. I mean -- like we talked about last year, we had a few stores that may be opened a little soft in Chicago, but we're very, very excited about the store that we opened here in '18 in Orland Park. But if you look at those stores as a whole and I'm assuming you're kind of talking about the maybe the incremental sales that calculates out to be about $69,700 for the quarter. If you look at that on a TTM basis, we're actually up on a TTM basis on the previous year. So we're up about 1%. So on a TTM basis, that's calculate now to be about a weekly average about $77,000. So again, right on that mark. But we opened these stores in the current year late in the quarter where we opened up some of those stores like one of the big stores we opened was Cedar Park last year and that was opened right there at the first of the quarter. So that made a big change in that as well as what we are talking about in the shift, that shift is reflected in that lower number here in the first quarter as well compared to last year.

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Operator [19]

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We will take our next question from Will Slabaugh with Stephens Inc.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [20]

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I wanted to ask you guys about the new markets in particular, can you talk about the early experience with putting a little bit more marketing behind some of the newer markets. I know you talked about that as being one of your initiatives and probably more to come. But if here -- if you think you're getting an appropriate return as of yet or what that really read there might be?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [21]

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Yes, I think so. We've done it in 3 openings currently. We did it in the third opening of the Chicago stores. Again, as I mentioned to you on the last call, we need to get some penetration in that market to know who we are. So obviously, we want to do some little radio and we used iHeartRadio and we are specifically highlighted on the Orland Park and we're really excited. I mean that one's popped for us and so that will end up helping all of the market and continue the awareness over there. We also did a little bit down in New Tampa, and New Tampa jumped out of the boat very nicely for us. And we also did some in Doral, which is down in the Miami area and we're pretty pleased with that store also. And then our Orland Park as we've also mentioned, but then we also did another one in Denver. All those had a little bit of testimonial radio. And then, also we did a little bit of the money that we talked about spending. We also did some residential and professional mailers that were not -- though we don't discount anything. If anything, I'd give away a nap. And so we did that in all those markets also. And I think that was all pretty good results. We're very pleased with the start, although it's obviously early like I said in my prepared statement, but we're very pleased with our 18 stores opening so far in the first quarter.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [22]

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Got it. And a question about value, you mentioned that's something that you're going to trying to communicate a little bit more, I guess, explicitly. Do you feel like in any of your markets right now, you're getting the credit you deserve from the guests regarding the everyday value already on your menu? And how do you view that opportunity to better tell the story? Is that through maybe a more explicit platform on your menu? Is it in-store messaging or otherwise?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [23]

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I think it's going to be and that's why, again, we're real excited about this marketing firm coming on with us that we'll make the decision probably at the end of this next couple of periods. The thing is we'll do it on the social media and digital media and so forth right off the bat and it might be some just generic things and local store marketing in the markets. But again, what we have done, I think, over the last 3 years is really talk about our defining differences, not that we've ignored our value, but I don't know if -- no, I don't think we've get it out there hard enough. So we need to keep the defining differences out there, the why we're different, but we need to get our value message that all this discounting that everyone is doing, you can eat inside my menu all day for $20. You don’t need a discount for that. And so that's definitely something that we're going to work hard with not only our own marketing department, but our partner as we get going in that.

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Operator [24]

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We will take our next question from Chris O'Cull with Stifel.

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Jonathan Clifton Conley, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [25]

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This is Jon Conley, on for Chris. I was just hoping you could share a little color around -- a little bit more color on off-premise. What percentage of that -- of it was -- was it this quarter? And did you see any pickup from catering? Or what other markets do you plan on expanding catering to?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [26]

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Sure, sure. So those sales for the quarter was up about 11.68% that was up over 12% -- 12.66% and that trend is improving in the fourth period or beginning of the second quarter. We're pretty pleased, as I mentioned on my call, we roughly, if you remember during the Christmas time, I think we had about $200,000 in sales in those markets. I expected a pretty decent drop and there wasn't one. We ended up doing about $180,000 in the first quarter out of those 3 stores and 3 vans, again 1 in Nashville, 1 in Houston and 1 in Dallas. Yes, we'll be looking throughout the year as we move forward. It will possibly be looking at 1 in the Chicago area, now that I have the 3 stores there, that'll also help us raise an awareness, because we'll have the van in the market. I'll look at the D.C. market and possibly the Cincinnati Dayton market. Those would be the first 3.

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Jonathan Clifton Conley, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [27]

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Great. And then also it looks like your commodity inflation was a little bit lower than we anticipated with some like you guys had originally said 2% to 3% in the first half of the year. But cost of sales was approximately flat. Did you guys see commodities that were lower than expectation?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [28]

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Well, what we saw was it came back a little bit at the end, but we were still up over 2%. The reason why it's flat is even though we have effective pricing in there, 1.8%, what I think when we actually did the mix of stores for that, we've opened a lot of stores since that mix in the Tier 4 that's dragging that down a little bit. So effectively through the Tier 4 menu, I think, we've maybe have a more price than that 1.8% that's keeping that flat. But we were up over 2% in the first quarter.

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Operator [29]

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We will go next to Jeff Farmer with Wells Fargo.

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Jeffrey Daniel Farmer, Wells Fargo Securities, LLC, Research Division - MD and Senior Restaurant Analyst [30]

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I think you mentioned that you saw 20 basis points cannibalization headwind in the first quarter. Where do you expect that headwinds to trend to over the next few quarters?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [31]

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No, it just flattened out, Jeff, and we're starting to see that flatten out significantly in Round Rock as we speak. Right now 183, which is the closest to that is still seeing a little bit, not as drastic as it was. But we should see that disappear here during the next 2 to 3 quarters.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [32]

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Yes.

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Jeffrey Daniel Farmer, Wells Fargo Securities, LLC, Research Division - MD and Senior Restaurant Analyst [33]

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Okay. And then you just touched on the off-premise...

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [34]

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Thanks, Jeff.

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Jeffrey Daniel Farmer, Wells Fargo Securities, LLC, Research Division - MD and Senior Restaurant Analyst [35]

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Yes, I think off-premise then 10% to 12% of mix in recent quarters. When it comes to introducing online ordering across the system in the next few months, were you comfortable with that off-premise number trending to as a percent of sales, how high will you let that go theoretically?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [36]

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Well, Jeff, I think, we'll let it go as high as we can comfortably operate it within our 4 walls. And just to give you a range, that range is in our restaurants from anywhere from 5% up to 22%, 22% at some of our busiest restaurants. So I think, it has room to grow there. We're expecting our ticket average to grow once we get the online ordering. Obviously, it's not going to start right off the bat because we need to advertise that as soon as we get it up and running. But from what I've researched, we can expect that ticket average to grow once we get that online and once we start advertising that.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [37]

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I think it's a great question because there is a time that it'll eventually affect the 4 walls if you let it get too high. And we have a good majority of our stores and definitely down in Texas market that is in the high-teens. So we have some room to get comfortable and something that I'll watch from an operator perspective to make sure we can handle any and all things that we're doing with not only that, but with our patios and so forth.

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Jeffrey Daniel Farmer, Wells Fargo Securities, LLC, Research Division - MD and Senior Restaurant Analyst [38]

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Okay. Then last question is really more on a segment than your business, but casual dining has obviously seen nice inflection here in March and April, much better same-store sales. Then we had seen in prior months, I'm just curious if you guys have any comment on the drivers of that inflection and whether or not you expect this again to improve same-store sales performance the industry is seeing to persist in coming months?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [39]

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My crystal ball on that is, we've -- like I've been saying, I think you'll notice that a little bit at the end of last year and we're seeing a little bit of what we've always said, we're cautiously optimistic as we are moving forward here, and I am, and even in the recent trends, even pick up the noise of the weather. I think at the end of the day, I think, there has been the taxes and I think they got some money in their pocket that they were expecting or didn't understand. So I think that's helpful. I think people are getting numb to Trump and even when he is on Twitter all the time. So I think the viewership of all those things and getting things back to normal, everybody panicking is lessening. And those -- besides all the other reasons and excuses we've used over the last year, I'm drying up a little bit, I think that's mostly it.

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Operator [40]

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We will take our next question from Andy Barish with Jefferies.

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Andrew Marc Barish, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [41]

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On the labor line, I assume, the progression should look better as you go through the year. I'm just wondering the impact of not having that big Christmas week in the 1Q on the deleverage you saw. And then when you get the full integration with POS, what are kind of goals in terms of some of the labor management opportunities there?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [42]

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Yes, Andy, as far as obviously losing that we have always said, it's not only our highest volume week, it's our best, most profitable week we have of the whole year. Along with that, and then losing roughly over $1 million in just the weather-related issues and that's definitely hurt us on the labor percent. So you should expect in the second and third quarters to be obviously better than that number as we move forward. And then obviously, we'll have the fourth quarter, which is a lower indexing quarter for us. So you might see it pop up a little bit from the third quarter. But yes, this one had a whole bunch of things going against us in this first quarter. As far as the labor scheduling, the key for us there, believe it or not, with all the labor laws is getting rid of the early punches and the late punches, and that's what we're going to be able to do with this system that we have in and whether it's a 15-minute early punch but that adds up a lot. And I think the second thing we do with it, Andy, is it's called proper projections as far as scheduling projections. And I don't think we have a ton of that when we look at that even though it's a little bit more of a manual process. I think the biggest savings you're going to see with us is that the known dollars that we have by sales hour and that's in there, and then the biggest one is the time clock reinforcement.

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [43]

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And to interject, Andy, when I'm looking at that big week and what is the impact was for the quarter on the store level margin, that was about 60 to 70 basis points for the quarter. So it was -- it had an impact definitely on our overall margins.

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Operator [44]

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We will take our next question from Brian Vaccaro with Raymond James.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [45]

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Just a couple of follow-ups. Jon, just a quick one. You just mentioned the extra week 60 to 70 basis points, that shift in the high volume week, that was for the overall store margin? Just wanted to confirm that?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [46]

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Yes, sir.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [47]

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Okay. And, back to the Q1 comps, could you provide some more perspective on what you saw from the day-part perspective? Any change in those trends versus recent quarters that are worth noting? And also any regional variations that might be worth highlighting?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [48]

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You don't know, it's fairly consistent with Q4. What we saw was, lunch was a little lighter than dinner as we saw in Q4 from the lunch to dinner perspective. And from a regional perspective, it was pretty consistent with Q4 as well.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [49]

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Okay. And then on the labor line, we've touched on that already. But thinking about the weight of new unit inefficiencies, do you expect those to dissipate, and if so, can you help us sort of quantify that as we move through the year on the labor line, specifically?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [50]

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Actually kind of what Steve was talking about previously. You're going to see that. I mean, we got a lot of noise in that. I guess, we can -- if you call me up, we can talk a little later about that. But what we're seeing on Q3, remember that if and when you're comparing to Q3 last year, I think, we're talking about a 3% inflation rate. But you can see that flat to last year given the inefficiency we had on the hurricane and things like that. So there's a lot of noise in the last year's numbers.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [51]

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Hurricanes?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [52]

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Hurricanes. There's a lot of noise in last year's numbers that hopefully will flush out this year and help us out a little bit in the labor line. But you're looking at from an inflation perspective, you're probably 30 to 40 basis points on the year. And then, at year-over-year, you're still looking at probably another 30 or 40 basis points on inefficiencies of these new stores.

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Operator [53]

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(Operator Instructions) We will go next to Andrew Strelzik with BMO Capital Markets.

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Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [54]

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The range of openings for the year that you're looking for is still relatively wide, I guess, almost halfway through the year now. Just wondering, is the variance really that wide at this point. What does that depend on? And at what point do you think you will have a better visibility on where that's headed?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [55]

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We'll have visibility over that around when we report the next call, the next earnings. Right now, as I've always said, what we want to do is, I need to be up in customer counts. I want to get -- that's our #1 focus as a group in our company. Right now, we're seeing that. Take away the noise, we've seen some positive sales and the trends that we were liking. But we still -- having cracked -- still down a couple in 10s in traffic. So that's our #1 thing and that's the biggest decision-maker for me. So that's what we are looking for and I want to see it sustained. So that's our biggest decision-maker, if it's sustained and we get above it, you might see us a little bit more than the mid-range to the higher end. But if it stays on that side, we're going to knuckle under and figure out how to make sure we're up in sales, but specifically customer counts.

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [56]

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And Andrew, we have 2 or 3 stores right there, right at the end of the year, early next year that can flip either way. So even if we do open those in this year, it'll probably be later in the year, if you get to that higher number.

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Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [57]

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That's helpful. And I was just wondering lastly, the 40 basis points that you guided to investments in marketing and your off-premise, how much of that actually showed up in the quarter? And in the markets where you're increasing the advertising, roughly how much was that up on a year-over-year basis?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [58]

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Yes. So basically we haven't seen the part related to the operating expenses yet, that will be in the last half of the year when we actually implement the -- the to-go because that's mainly into to-go packaging, although there's a piece of it that's happening with the catering. As far as the advertising as you can see on that line item, we're already kind of spending that. So that will be consistent kind of through the year. And as we get that new firm on board, we'll kind of reallocate those expenses to them.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [59]

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And the number we have in there is around $1 million to $1.1 million as far as our marketing front.

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Operator [60]

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We will take our next question from Nick Setyan with Wedbush Securities.

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Nerses Setyan, Wedbush Securities Inc., Research Division - SVP of Equity Research and Equity Analyst [61]

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I was kind of thinking about 2019, are we can enter any new market in 2019 or is it all going to be backfill?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [62]

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It'll be pretty much be all backfill. All backfill.

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Nerses Setyan, Wedbush Securities Inc., Research Division - SVP of Equity Research and Equity Analyst [63]

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All right. Jon, the [1 8], the 1 8 price was a little bit above what, I thought price would be in the quarter? Is that 1 8 kind of the right way to think about it going forward? Or are there going to be any incremental maybe upticks or downticks as the year progresses?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [64]

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That is kind of what our pricing was Nick. Like I said, we were opening stores in our Tier 4 markets, which may give a little benefit on that, if you will since those are higher prices -- higher menu prices, given the size of our overall store base. But that is going to be the effective pricing that we have in it.

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Nerses Setyan, Wedbush Securities Inc., Research Division - SVP of Equity Research and Equity Analyst [65]

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And then the mix -- it's been pretty much exactly flat for a while. I mean, as we kind of go into some -- as we open some new stores, et cetera, in new market, is it really -- I mean -- I guess, is it may be the presentation of the menu, is it the price point that kind of makes that mix real consistent year-over-year for the most part?

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [66]

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Yes. Correct.

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [67]

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Yes, I think most of the things on our menu, there's not really some very -- they're all consistently from a cost of sales standpoint fairly consistent as well as pricing, there is really no high and low prices that can fluctuate that mix. I mean, if you remember, the only time that we really had a significant mix lift was when we introduced a larger drink, which was at a higher price point. And then, it was negative the following year as we are trying to -- we were rolling over that. And really that's the only time that we've really had a mix difference. Our menu is totally customizable and people who eat at our restaurant gets accustomed to ordering the same thing over and over, if you can believe that, and that mix stays somewhat consistent and we don't have the LTOs to drive that otherwise.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [68]

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And as we go outside of markets, I think, as we went more north we had to teach people and we do it rather quickly what rellenos are and so forth and we do it at the tables. And we really -- if we go into a market and we go to a table of 12 and all there is taco's on it, we ended up make them some food and showing them the breadth of our menu really, really quickly, so they get into try things they're not accustomed to. So that's why we get back to a simpler -- similar mix, so we do that often in all of our stores.

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Nerses Setyan, Wedbush Securities Inc., Research Division - SVP of Equity Research and Equity Analyst [69]

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And then just lastly, what was the impact from the non-comp stores entering the comp base this quarter, Jon?

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Jon W. Howie, Chuy's Holdings, Inc. - VP & CFO [70]

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It's about 20 basis points.

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Operator [71]

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At this time, there are no further questions. I will now turn the conference back over to management for any closing comments.

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Steven J. Hislop, Chuy's Holdings, Inc. - President, CEO & Director [72]

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Thank you guys so much. Jon and I appreciate the continued interest in Chuy's, and we will always be available to answer any and all questions. Again, thank you, and have a good evening.

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Operator [73]

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This will conclude today's conference call. We thank you for your participation. And you may disconnect at this time.