Chuy's (NASDAQ:CHUY) Q3 Sales Beat Estimates

Jabin Bastian /
2023/11/02 4:22 pm EDT

Casual restaurant chain Chuy’s (NASDAQ:CHUY) reported Q3 FY2023 results beating Wall Street analysts' expectations, with revenue up 6.36% year on year to $113.5 million. Turning to EPS, Chuy's made a GAAP profit of $0.39 per share, improving from its profit of $0.27 per share in the same quarter last year.

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Chuy's (CHUY) Q3 FY2023 Highlights:

  • Revenue: $113.5 million vs analyst estimates of $111.7 million (1.61% beat)
  • EPS: $0.39 vs analyst estimates of $0.35 (10.9% beat)
  • Gross Margin (GAAP): 20.8%, up from 19% in the same quarter last year
  • Same-Store Sales were up 2% year on year (roughly in line)
  • Store Locations: 100 at quarter end, increasing by 3 over the last 12 months

Steve Hislop, President and Chief Executive Officer of Chuy’s Holdings, Inc. stated, “Our solid third quarter performance was a direct result of our team’s continued progress in executing our initiatives to drive sustainable top-line growth and profitability. For the quarter, we grew revenue by over 6% and posted a comparable sales increase of 2%. We were also able to achieve one of the best restaurant-level operating margins in the casual dining industry segment at 19.4% through our continued focus on four-wall operational excellence. Overall, we believe our business fundamentals remain strong and our team is eager and energized to provide our customers with the unique Chuy’s experience they have come to expect when they visit our restaurants.”

Known for its ‘Big As Yo' Face’ burritos, Chuy’s (NASDAQ:CHUY) is a casual restaurant chain that specializes in Tex-Mex fare, which combines elements of traditional Mexican cuisine with Southern American cooking.

Sit-Down Dining

Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.

Sales Growth

Chuy's is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 1.62% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was weak as its restaurant footprint remained unchanged, implying that growth was driven by more sales at existing, established dining locations.

Chuy's Total Revenue

This quarter, Chuy's reported solid year-on-year revenue growth of 6.36% and its $113.5 million of revenue outperformed analysts' estimates by 1.61%. Looking ahead, the analysts covering the company expect sales to grow 8.39% over the next 12 months.

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Same-Store Sales

Chuy's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 6.64% year on year. Given its flat restaurant base over the same period, this performance stems from increased foot traffic or larger order sizes per customer at existing locations.

Chuy's Year On Year Same Store Sales Growth

In the latest quarter, Chuy's same-store sales rose 2% year on year. This growth was a deceleration from the 2.6% year-on-year increase it posted 12 months ago, showing the business is still performing well but lost a bit of steam.

Operating Margin

Operating margin is an important measure of profitability for restaurants as it accounts for all expenses keeping the lights on, including wages, rent, advertising, and other administrative costs.

In Q3, Chuy's generated an operating profit margin of 6.48%, in line with the same quarter last year. This indicates the company's costs have been relatively stable.

Chuy's Operating Margin (GAAP)

Zooming out, Chuy's was profitable over the last two years but held back by its large expense base. It's demonstrated mediocre profitability for a restaurant business, producing an average operating margin of 6.54%. Its margin has also seen few fluctuations, meaning it will take a big change to improve profitability.

Key Takeaways from Chuy's Q3 Results

With a market capitalization of $604.2 million and more than $69.9 million in cash on hand, Chuy's can continue prioritizing growth.

We enjoyed seeing Chuy's exceed analysts' revenue expectations this quarter. We were also glad its EPS outperformed Wall Street's estimates. To finish off the positives, the company also raised full year EPS guidance. Overall, this was a solid quarter for Chuy's. The stock is up 1.63% after reporting and currently trades at $34.38 per share.

So should you invest in Chuy's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.