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Edited Transcript of CHUY earnings conference call or presentation 6-Nov-18 10:00pm GMT

Q3 2018 Chuy's Holdings Inc Earnings Call

Austin Nov 14, 2018 (Thomson StreetEvents) -- Edited Transcript of Chuy's Holdings Inc earnings conference call or presentation Tuesday, November 6, 2018 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jon W. Howie

Chuy's Holdings, Inc. - VP, CFO & Director

* Steven J. Hislop

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

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Conference Call Participants

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* Alexander Russell Slagle

Jefferies LLC, Research Division - Equity Analyst

* Andrew Strelzik

BMO Capital Markets Equity Research - Restaurants Analyst

* David E. Tarantino

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

* Hugh Gordon Gooding

Stephens Inc., Research Division - Research Associate

* Jonathan Clifton Conley

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

* Nerses Setyan

Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst

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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 Third 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, Inc.

At this time, I would like to turn the conference over to Mr. Howie. Please go ahead, sir.

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

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Thank you, operator, and good afternoon. By now, everyone should have access to our third quarter of 2018 earnings release. It can also be found on our website at 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. - Chairman, CEO & President [3]

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Thank you, Jon, and thank you to everyone for joining us on the call today. Let's begin with a high-level overview of our quarterly results and the progress we've made to our various initiatives.

For the third quarter, revenue grew 9.7%, including a 0.5% increase in comparable restaurant sales on a calendar basis. Despite a modest top line improvement, our third quarter was a challenging one as we continue to face industry-wide labor cost pressures, which negatively impacted our restaurant-level profitability. In addition, we experienced heavier rainfall than normal during much of the quarter, including the wettest September in history in most of our core Texas markets, which further muted our results by reducing our patio sales by over 18%. However, we have several initiatives on the way that we believe will help us overcome these short-term challenges and build a foundation for a long-term sales growth and profitability.

With that, let me update you on our progress of these initiatives. Beginning with marketing, we continue to work closely with our new market -- our new media marketing partner, Kelly Scott Madison, to focus on improving our brand awareness and value messaging in both core and new markets through local store marketing and social media campaigns. We recently started our digital campaign in mid-September that includes paid search and mobile location-based advertising, which is a first for our -- for the company.

Additionally, we identified 3 specific markets: Chicago; Washington, D.C.; and Nashville, to test targeted marketing through the holidays, which include the use of billboards, metro rail posters, sponsorships, digital media and iHeartRadio and ESPN Radio campaigns. These initiatives will build added awareness and frequency and help us create a successful marketing plan for 2019.

On the technology front, our partnership with Olo to provide our guests with a robust online ordering system is progressing well. In fact, we recently finished integrating our new online ordering with our POS system at the end of October and have rolled out the Olo system to all of our restaurants. While still in its infancy with little to no marketing behind it, early adoption rate is encouraging, with Olo now represented -- representing 8% to 10% of all to-go ordering. We will use this system as a stepping stone for future loyalty program during 2019.

Lastly, with regards to labor initiative, we completed the integration of our new labor management tool with our POS system during the third quarter and now in the process of rolling it out systemwide. While we won't begin to see the benefits until 2019, this new tool will help us mitigate the ongoing labor pressures by optimizing our labor productivity as well as enhancing our sales projections going forward.

Now let me quickly touch on our development. We opened 2 Chuy's restaurants during the third quarter: 1 in Kendall, Florida; and 1 in Miami, which now gives us 3 restaurants in the Miami area. We've also opened 2 additional restaurants subsequent to the end of the quarter: the first in Overland Park, Kansas, which is our third restaurant in Kansas City market; and the second one in Houston, Texas located in Vintage Park, a premier destination for shopping, dining and entertainment. This Vintage Park restaurant marked our 100th restaurant opening, and we're excited to have reached this milestone. It is also our ninth new restaurant opening of the -- of 2018, and we've now completed our development plan for this year.

As we look ahead, we remain disciplined in our capital allocation, balancing new store growth with an ongoing focus on building brand awareness and traffic while also improving margins. With this focus front and center, we will limit our development during 2019 to 5 to 7 new restaurants. All of our 2019 development will be in existing markets. We believe that this moderate growth rate should allow us to better focus on the opportunities we have to grow sales in our existing restaurants as well as improve margin. We believe this approach, along with our initiatives in marketing and technology, is the best strategy to drive shareholder value in this tough environment and set us up well for success -- for a successful 2019.

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

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

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Thanks, Steve. Revenues increased 9.7% year-over-year to $101.2 million for the third quarter ended September 30, 2018, driven primarily by $10.4 million in incremental revenue from an additional 144 operating weeks in total. We had approximately 1,264 operating weeks during the third quarter of 2018.

Turning to comparable restaurant sales. Due to the inclusion of the 53rd week in fiscal 2017, there was a 1-week calendar shift in the comparison of the third fiscal quarter of 2018 to last year's third quarter. On a fiscal basis, comparable restaurant sales decreased 0.4% for the 13-week period ended September 30, 2018, compared to the 13-week period ended September 4 -- 24, 2017. On a calendar basis, which we believe is more reflective of the year-over-year change in the business, comparable restaurant sales increased 0.5% for the 13-week period ended September 30, 2018, compared to the 13-week period ended October 1, 2017. The 0.5% increase in comparable restaurant sales on a calendar basis was driven primarily by a 1.7% increase in average check, partially offset by a 1.2% decrease in average weekly customers.

As Steve noted, we received an unusually high amount of rainfall in our core Texas market during the quarter that impacted sales during August and September. We estimate the unfavorable weather conditions during the third quarter of 2018 more and offset the favorable impact from lapping Hurricanes Harvey and Irma last year by approximately 30 basis points. Effective pricing during the quarter was approximately 1.5% to 2%. There were 80 restaurants in our comparable base at the end of the third quarter of 2018.

Turning to a discussion of selected expense items. Cost of sales as a percentage of revenue decreased 110 basis points to 25.6%, helped largely by favorable produce and chicken prices. We continue to expect the year-over-year improvement in cost of sales in the fourth quarter, albeit at a smaller magnitude as we've begun to see increases in cost of beef we use for our fajitas in addition to rising tomato and avocado prices [in the top] , again, October of this year. Year-to-date, our commodity inflation was approximately flat with last year, and we are still expecting to end up between 0 and 0.5% for the full year.

Labor costs as a percent of revenue increased approximately 180 basis points to 37%. The increase was attributable to hourly labor rate inflation in our comparable stores of approximately 3.6% and new store labor inefficiencies as well as higher labor rates in some of our newer markets. We continue to expect our labor inflation to be approximately 3% to 3.5% for the year.

Restaurant operating costs as a percentage of revenue increased by 50 basis points to 14.8%. The increase was primarily due to an increase in delivery charges related to over a 14% increase in to-go sales as well as higher insurance costs.

Occupancy costs as a percentage of revenue increased 60 basis points to 7.6%, primarily due to higher rental expense at certain newly opened restaurants as we continue to expand into larger markets and higher [straight-line] rent from the extended lease terms at certain existing restaurants.

General and administrative expenses held steady at $4.8 million in the third quarter to the same period last year. As a percentage of revenue, G&A improved by 40 basis points year-over-year to 4.8%.

As a part of a regular review, during the third quarter, we incurred a noncash asset impairment charge of approximately $12.3 million or approximately $11 million net of tax related to 6 restaurants. Because of the impairment charge, we incurred a tax benefit of $1.3 million during the quarter. Excluding the impact of the noncash loss on asset impairment, our income tax rate decreased to a benefit of 6.9% during the third quarter. We now expect our tax rate for the year to be in the 6% to 8% range.

In summary, net loss for the third quarter of 2018 was $7.5 million or $0.44 per diluted share compared to a net income of $3.2 million or $0.19 per diluted share a year-ago period. Excluding the impairment charge, adjusted net income for the third quarter of 2018 was $3.5 million or $0.20 per diluted share compared to the year-ago period. We ended the quarter with $10.8 million in cash on the balance sheet, and we currently have no debt.

Now turning to guidance. We are adjusting our 2018 outlook. Our revised expectations largely reflect increased labor costs; decreased sales in the third and some in the fourth quarter; and lower expected earnings per share for the third quarter and some in the fourth quarter. We now expect adjusted 2018 diluted earnings per share, after excluding the asset impairment charge, of between $0.88 and $0.92 compared to the previous range of $1.09 to $1.13. This compares to 2017 adjusted net income per diluted share of $0.96 or $0.89 after excluding approximately $0.07 per diluted share as a result of the extra week in 2017.

Our guidance is based on the following updated assumptions. Flat comparable restaurant sales growth compared to previous guidance of up to 1% on a 52-week fiscal basis. Restaurant preopening expenses are now expected to be approximately $4.3 million to $4.4 million compared to $4.4 million to $4.8 million previously. We continue to expect G&A expenses between $20.5 million to $21 million; we now expect an effective tax rate of approximately 6% to 8% compared to a previous expectation of 10% to 11%. We continue to model annual weighted average diluted shares outstanding of 17.1 million to 17.2 million shares. As we noted, we have now completed our development for 2018 at 9 Chuy's restaurants this year. Lastly, our capital expenditures, net of tenant improvement allowances, are projected to be between $34 million and $37 million.

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

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

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Thanks, Jon.

Our near-term industry challenges persists. Our core fundamentals remain unchanged, and we focus on taking care of our guests by delivering high-quality, made-from-scratch food and drinks with exceptional service standards and unique and upbeat atmosphere. We have the initiatives in place to help us weather these near-term macro challenges, and we believe these will help build stronger foundation for the company in the years to come. Of course, all of these would not have been possible without the dedication and hard work of our employees, and we would like to thank them for their tireless efforts in making our brand unique.

With that, we're happy to answer any and all questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes 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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I guess my first question is about sort of the new store performance and how much that is influencing your change in profit outlook for this year. So first of all, could you comment on how the current class or recent class of opening is performing relative to your expectations? And then I do have a follow-up on the overall earnings guidance for the year.

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

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Well, we've had a little bit of a mixed result in the Chicago area. We mentioned earlier we have 2 that are doing a little bit lower than we expected and 1 doing more than we've expected. On Miami, we've had, though, one that we're very disappointed in, one we're excited about, and one is in the middle. Overall, it's down a little bit from our expectations.

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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 then I guess when I think about the change in guidance, I guess how much of the change in guidance that's related to the new store performance? Because I guess, if I [flow] through 1 point of same-store sales and look at what that would mean and then look at the change in the implied guidance for profitability, there's a pretty big disconnect here. So I guess can you help to piece that together, Jon?

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [5]

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Sure. I mean, the biggest thing was, after the second quarter, based upon where kind of -- or the produce pricing was, we were expecting cost of sales to be very deflationary in the fourth quarter as it was in the third quarter. We're well -- we're down well over 3% in the third quarter, and I was expecting down over 2%. But with the hurricanes that hit us in September and October, again, it spiked the produce prices, we're also seeing the phenomenon with our inside skirts, which is our [then] meat, because of a bunch of exporting to Japan, those have spiked on us a little bit in the year. So now we're expecting some inflation in the range around 2% for the fourth quarter. So that differential alone was about 80 to 90 basis points. And the labor fluctuated. We were expecting a lot less labor and, with the weather that we got in October, deleverage, that changed about 70 basis points kind of in our projections as well. And then from -- when you're looking at consensus to ops expense, they had that projected similar to last year in the ops expense. But recall last year that we had some adjustments in our ACA accrual. That came down about 80 basis points in that. So we're not seeing the deleverage that we did last year in that line item. So those things there are the big bulk of the items along with the reduced sales volumes.

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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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Got it. And then the impairment that you took on the 6 restaurants, can you maybe explain the profile of those 6 restaurants, whether those are recent classes of openings or longer-dated restaurants? If you could just help us understand what those are.

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

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Well, I won't get into geographics, but it's kind of a mix. To be quite honest, David, it's probably half and half. Some of the -- there's some that are newer, and then there's some that are older restaurants.

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Operator [8]

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And the next will be Will Slabaugh with Stephens Inc.

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Hugh Gordon Gooding, Stephens Inc., Research Division - Research Associate [9]

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This is Hugh on for Will this afternoon. I was just wondering if you could talk a little more about the cadence of same-store sales trends throughout the quarter. I know you said August and September were negatively impacted by weather but just trying to better understand where we were in July and then how significant that weather headwind became both in August and then in September. And then if you could kind of give us some idea where we're sitting through October.

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [10]

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Yes, Hugh, in the period 7, we were up slightly in period 7. Then we were up pretty big in period 8, but that's when we lapped the hurricane from a year ago. We were up a little bit -- we were up pretty good then. And then with this rain and all the weekends we didn't have for patios and anything, we were down in September by 1.4%. October started just like September as far as the rain. And then like I've already mentioned to you, we're flat probably right now in October, but we had again the rain from every single weekend, and then probably, it's 90% of the time and all that with all the flooding that actually happened down in Austin and so forth. So it's that same thing. Luckily, we've had a break last weekend in some weather that was happy to -- we were happy to see that. And that's the case.

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Hugh Gordon Gooding, Stephens Inc., Research Division - Research Associate [11]

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Got it. And then I just want to touch on the competitive dynamics in your core markets. We've seen some of your larger competitors' report now, and I was just wondering if you think there's maybe some lost market share there and if you think there are opportunities either from a value off-premise or menu initiatives to maybe stabilize some of those share gains or losses?

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [12]

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Yes. As we mentioned on our last quarterly call, we're going to expand in the fourth quarter, catering a little bit more. We're also going to -- we just talked about Olo a second ago in my prepared remarks, that we're expecting some nice movement from it as we go through the year and really specifically in 2019.

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Operator [13]

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And Andy Barish with Jefferies is next.

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Alexander Russell Slagle, Jefferies LLC, Research Division - Equity Analyst [14]

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This is Alex on for Andy. Just thinking about the cost of goods, losing some of that favorability in the fourth quarter and then the persistent labor inflation, how should we think about the gives and takes on the restaurant-level margin in 2019? I know that the comparable basis has been running about that 3.5% wage inflation. But I think, Jon, last quarter, you talked about the new stores could come in around 5%. So what are you expecting in 2019? And how much is sort of that natural wage inflation versus the impacts of new store inefficiencies?

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [15]

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Well, I just want to make sure that when I say 5% that's really the increase in the weighted average rate. Once they've become a comparable restaurant, I don't think that those are inflating at 5%, if that makes sense. It's just because they're coming in at higher rates, it's driving our weighted average up over the previous year. But on a comparable basis, I think we'll still see kind of the same inflation rate. But as far as some of the initiatives that we have in place, especially around labor and then driving sales, we're looking -- we're always looking to save on margins. And with our reduced development, that's what we're going to focus on next year. And we've got some great initiatives in -- I would say, in labor and marketing and some other things as far as the menu development -- not really menu development but menu analysis, back of the house analysis and things that we're doing that we're excited about in 2019, that to the extent that we can, if the marketing turns around and gives us a lift at that 2.5%, 3%, I think we can see our margins stabilize.

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Alexander Russell Slagle, Jefferies LLC, Research Division - Equity Analyst [16]

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So with the new POS integration with the new labor management tool, that obviously gains some traction in 2019. Where do you think the real impact is there? Is it around scheduling and deployment at peak versus offpeak? Or I think in the past, you've talked about just managing the schedules, the time clock and punch in, punch out. Have you seen any modest improvement yet?

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [17]

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Well, right, it's both of those. So it's clock-in enforcement, and then it's scheduling at the peak hours and off in the down hours if you schedule them properly. We have that now integrated. We haven't rolled it all out to the stores. It's in maybe 40 stores right now. So that is -- we're waiting to see that benefit in 2019. But the biggest thing is we're doing some other things in labor as well as far as [glide] path on the new stores and getting those down to kind of the base hours a lot earlier in a 7-month time frame and things like that. But I think we'll see some benefit on out in 2019.

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Alexander Russell Slagle, Jefferies LLC, Research Division - Equity Analyst [18]

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Got it. I guess and just the last question. Steve, you mentioned this future loyalty program that you could leverage digital with. Any sort of detail or color on that timing with the program? And I guess I would ask, what is the typical frequency of your current dine-in guests? And obviously, it's very early on in digital, but are those sales suggesting that you've got an increased frequency from those users?

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [19]

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Yes, it's a little too early for me to throw that out here right now because we just started it in September. So we have a 2-weeks look at it, so I'm hesitant to talk anything on that thing. But -- what was the question?

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [20]

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I think that was, I mean, frequency.

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

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Yes, so frequency. So look, the timing of the loyalty, you're going to be looking at that probably around the June, July time frame. And that's when we'll have enough of the information with our -- or not only, we're also working with a new real estate tool. That also will work [aside from] the phone systems and so forth, along with our marketing with Kelly Scott Madison. And I think we'll have enough information and have a good toolbox to go right by the middle of 2019.

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Operator [22]

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And next will be Chris O'Cull with Stifel Financial Corp.

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Jonathan Clifton Conley, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [23]

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This is Jon on for Chris. I was just wondering if you could give a little bit of color around pricing for 2019. Do you guys have any plans to take increased pricing with the labor pressure you're seeing?

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [24]

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Well, right now, we usually take our price increase in the first -- the second -- the first day of the second period of the year. Right now, we've been looking at over the last few years, we've been in that -- for a 10-year average, we've been in that 1.5% to 2% range. And right now, I don't anticipate going anything higher than that at all, maybe a tad bit lower, but we'll see that. But we'll look at all opportunities at that particular time. We currently have 4-tiered menus based on geographics, and we'll pay some attention closely to each tier. What we're finding out in our Tier 4 is that we have a little bit more value spread than in Tier 1., so we might look at something like that. But I'm going to say right now, and this, where I'm at today, I'd say, is going to stay in that 1.5% to 2% range.

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

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Okay, great. And then I just had one more. I know you guys are planning on putting 5 to 7 stores in existing markets. Should we be thinking about those stores going into core markets? Or are they going to be building out of noncore markets? And is there any sort of cannibalization that we should expect from those?

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

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There'll be no cannibalization planned on at all, but I'd say over half of them and what we call core, but they're all in very well-run markets and that we're doing well in.

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Operator [27]

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And next will be Andrew Strelzik with BMO Capital Markets.

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Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [28]

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My first question is about performance in the stores outside of Texas. Obviously, Texas was impacted by weather in the quarter, as you said. But if you back that out, and I guess I'd like to look at it on a 2- and 3-year basis, it doesn't seem like things are getting any better. [The industry was doing relatively well.] So just wondering what you saw outside of Texas through the quarter.

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [29]

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Yes, outside of Texas and in some of our markets like Kentucky, Arkansas, Indiana, we saw some very [valuable] sales; Colorado, except Colorado is not an [organic] state. So we've seen some very good sales there outside of Texas, which is, really, we haven't seen that as much in the past, so that was very, very good to see.

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [30]

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And a lot of the storms that we're talking about with Texas rolled all the way up into the Southeast. Those are part of the patio days missing.

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

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And with [sales state, I'm meaning] Nashville and Atlanta and so forth.

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Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [32]

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Yes, so that makes sense. My second question, how flexible is the development pipeline for 2019? Obviously expecting it to be a little bit more restrained next year than initially expected. And what is -- once you get past some of the operational stuff and some of the efficiencies that you're looking to achieve, how do you think about what a good sustainable growth rate is going forward?

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [33]

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Right now, we're thinking in that 12% to 15% range. The key for us is -- the big thing for us is we have to continue to really focus inside our 4 walls, and that's increasing discount. And I think I've said it on our last call or the call before that, if that's going to be what was going to -- that's what will change our growth pattern. And as we get up in same-store sales and specifically discounts, we'll look at bringing that number back up to the rate I just said.

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Andrew Strelzik, BMO Capital Markets Equity Research - Restaurants Analyst [34]

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Okay. And then my last one, you talked about stabilizing margins with some of the initiatives you have kind of in the hopper here for 2019. But with respect to marketing, as you do some of the targeted [stuff] that you haven't done before, how should we think about the step-up in marketing assuming that those things are successful?

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [35]

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Yes, right now, if you look at our marketing spend, I think we had around 0.25% from 0.75% to 1%, and then be right around that 1% to 1.1%. If I'm really excited about what's going to happen over the holiday period of time, we might invest another couple basis point -- kind of like another 20 basis points in it if we're excited about it. And we'll use that. Obviously, opening that store, that would be a nice use of our money if we can drive some top line. So that's where we'll look at, and we'll discuss that through the test period of the end of the year.

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Operator [36]

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(Operator Instructions) The next question comes from Nick Setyan with Wedbush.

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Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [37]

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Can we just go over the chronology of some of these sales initiatives again? So we had the search tools in mid-September. It sounds like the D.C. and 2 other markets, the rollout is in Q4. We've got loyalty in the middle of next year. And maybe just give us a little bit more detail about the initiatives with Olo.

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [38]

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Sure. And why don't you go with Olo, Jon, and I'll take the media plans for the markets?

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [39]

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Sure, Nick. This is Jon. Olo, we just completed the rollout last week of all our stores. Currently, like Steve said, the mix or the rate is -- we're seeing anywhere from 8% to 10% of our to-go sales now on Olo. That's without any marketing in the period. So we're going to start putting marketing behind that. We're very pleased with how that's going and how smooth it's going at the stores. So I think that will be definitely a benefit going forward.

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [40]

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And as far as the media plans in -- for Chicago and the Nashville and the Washington, D.C., those will start probably like a week to 10 days before Thanksgiving. They'll include what we've talked about, radio, Spotify, Hulu. We'll be also doing some cross-promotions with the radio stations on charities that we'll do, and we'll have some [remote set in all our] -- to all the stores in these markets along with the billboards and, again, the paid social and digital. And that's when that starts, and that will run right through the holiday.

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Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [41]

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Got it. And with the reduced unit growth next year, what's the CapEx we should think about, Jon, for next year?

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [42]

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Yes, we're looking at one thing that frees up some cash [versus] stock buyback as well. But I'm sorry, I don't have that in front of me, but it should be probably almost half of what you see this year. So I would say probably $20 million, something like that.

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [43]

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You can get more specific on the...

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Jon W. Howie, Chuy's Holdings, Inc. - VP, CFO & Director [44]

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Yes, we can follow up as we go on.

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Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [45]

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Yes, yes, okay. And then just other OpEx, it sounds like the third-party delivery goes in there, and we're already seeing a little bit of a bump. How should we think about that in 2019? Is that a 40 basis point bump? Is that a 50 basis point bump?

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

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That's a good question. I mean, that's something that we are focusing in on, on the delivery charge. I'm sure that's been a big item in a lot of people's P&L. So we're looking at ways that we can reduce that. But as you know, like we said, we're up 14% on our to-go, so it has a bigger impact on a basis in our OpEx. So we could probably see that increase 10% or 20% if we continue to drive our delivery and off-prem sales by another 10 or 20 basis points.

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Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [47]

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And then just last question on the -- on how we recognize occupancy and rent. [And others have changed] in accounts and spend that's coming next year. How does that impact you guys?

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

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Nick, it shouldn't have any impact on the P&L. It should have very little or immaterial impact on the P&L, but it will have a huge impact on the balance sheet.

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Operator [49]

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And that does conclude the question-and-answer session. I'll now turn the conference back over to management.

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Steven J. Hislop, Chuy's Holdings, Inc. - Chairman, CEO & President [50]

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Thank you so much. Jon and I appreciate your 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 [51]

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Thank you. That does conclude today's conference. We do thank you for your participation, and have a wonderful day.