Chuy's Holdings Inc (CHUY) Q2 2019 Earnings Call Transcript

CHUY earnings call for the period ending June 30, 2019.

Motley Fool Transcribers
Motley Fool Transcribers
Aug 9, 2019 at 7:34PM
Consumer Goods

Chuy's Holdings Inc  (NASDAQ:CHUY)
Q2 2019 Earnings Call
Aug. 08, 2019, 5:00 p.m. ET

Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Chuy's Holdings Incorporated Second Quarter 2019 Earnings Conference Call. Today's call is being recorded. At this time all participants have been placed on a listen only mode and the lines will be open for your questions following the presentation.

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'll turn the conference over to Mr. Howie. Please go ahead, sir.

Jon Howie -- Vice President and Chief Financing Officer

Thank you, operator, and good afternoon. By now, everyone should have access to our second quarter 2019 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.

Steve Hislop -- Chief Executive Officer

Thank you, Jon. Good afternoon, everybody, and thank you for joining us on the call today.

Let's begin with a high-level overview of our results and then go over the progress we've made in our various initiatives. We are pleased to see our top line momentum continue during the second quarter as we grew revenues by over 6%, including a 1.9% improvement in comparable restaurant sales. In terms of profitability, while we were able to improve our restaurant-level operating profit by approximately 5%, our restaurant-level margins were negatively impacted by continued hourly labor rate inflation and higher produce and beef costs during the quarter. To that end, we believe the various initiatives we put in place are important in our efforts to drive sustainable top line growth and will strengthen our foundation to further improve our profitability over the long-term.

With that, let me update you on our initiatives, which include targeted marketing campaign, investment in technology, off-premise sales strategy and labor efficiencies. In April, we launched targeted marketing campaigns in Chicago and Houston in an effort to improve brand awareness and better educate the market on Chuy's experience in Chicago, as well as drive increased frequency to our restaurants in Houston. Our efforts include promotional radio, strategic road and stadium signage, and advertising on digital platforms like YouTube, Hulu and Spotify.

To date, we have been pleased with the improvements we've seen in these two markets and during the third quarter. We will continue our marketing push in Houston and Chicago, while also adding Orlando to the mix. Looking ahead, in the fourth quarter, we plan to launch a similar campaign in Dallas. Apart from these targeted marketing efforts, we will continue to employ paid search, paid social media campaign and location-based platforms for all of our markets.

Turning now to technology. We are pleased with the trajectory of our online ordering adoption rate through our partner, Olo. As of the end of the second quarter, to-go sales through our website represented approximately 18% of all to-go ordering as our promotion helped drive increased adoption rate.

Another exciting aspect of our partnership with Olo is their Dispatch offering. Dispatch will allow us to not only synchronize our online ordering and delivering process for improved efficiency and order accuracy, but also provide our customers with various delivery options directly from our website. Our goal is to fully integrate the Dispatch service to all of our stores by the end of the year.

Additionally, in the technology front, we are working on a table management system to further improve our front-of-the-house efficiency with a plan to fully launch the platform by the end of September. We believe our current technology initiatives will allow us to gather important customer intelligence, and ultimately serve as a foundation for our future loyalty program.

We rolled out our catering platform in two additional markets during the second quarter and believe that catering can serve as an important part of our off-premise sales strategy. Catering not only gives us another avenue for top line growth, but it also helps improve awareness of the Chuy's brand. For the second quarter, catering contributed approximately $1.5 million in revenue compared to approximately $400,000 in the same period last year. We plan to offer catering in four new markets before the end of 2019.

On labor, we were able to leverage the improvement we made in our new store labor efficiencies as well as our menu pricing to offset the hourly labor rate inflation during the quarter. As labor pressures continue, our glide path initiatives become more important than ever as it allows us to reduce opening labor new hires by approximately 20% and achieve system average labor targets by month seven.

Switching to development. We successively opened three new restaurants during the second quarter, one each in Hamburg, Kentucky; Huntsville, Alabama; and Houston, Texas. Subsequent to the end of the second quarter, we opened one additional restaurant in Carmel, Indiana, bringing our total openings to date to five new restaurants. These new openings have performed well and truly demonstrate our operatives and development teams' ability to instill the Chuy's culture in a short time. Looking ahead, we have one more opening to complete our 2019 developments plan, which is expected to open in the middle of the fourth quarter.

As we have said previously, an important key to our future development will be our real estate analytics tool. The tool will allow us to create a psychographic profile of our top markets and use it to identify new markets for successful expansion going forward. To that end, we are currently hard at work in developing and testing this tool and are planning to utilize it for our 2020 development.

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

Jon Howie -- Vice President and Chief Financing Officer

Thanks, Steve. Revenues for the second quarter ended June 30th, 2019, increased to $113.1 million compared to $106.3 million in the same quarter last year. The increase was primarily driven by $7.9 million in incremental revenue from an additional 87 new store operating weeks as well as comparable restaurant sales growth. These increases were partially offset by a decrease in sales from noncomparable restaurants that are not included in the incremental revenue just mentioned. In total, we had approximately 1,307 operating weeks during the second quarter of 2019.

Comparable restaurant sales increased 1.9% during the second quarter, and included a 3.9% increase in average check, partially offset by a 2% decrease in average weekly customers. Unfavorable weather conditions negatively impacted our comparable sales in the second quarter by approximately 80 basis points in addition to the 20-basis-point headwind as a result of the timing of Easter. Effective pricing during the quarter was approximately 3.5%.

During a discussion of selected expense line items, cost of sales as a percentage of revenue increased 40 basis points to 25.8%, largely driven by approximately 5% in commodity inflation. Inflation was largely attributable to unfavorable beef and produce pricing, partially offset by favorable pricing in dairy. With the year-over-year increase in beef and produce expected to linger, we now expect commodity inflation of approximately 3% to 4% for the year.

Labor cost as a percentage of revenue decreased approximately 90 basis points to 34.3%, primarily due to mini price leverage, increased labor efficiency at new store openings and lower training expense for new managers. This was partially offset by hourly labor rate inflation on our comparable stores of approximately 3% and higher hourly rate in certain other markets.

Operating cost as a percentage of revenue increased 20 basis points to 14.1% due to higher insurance cost, restaurant repair and maintenance, credit card and delivery service charges, partially offset by favorable pricing on restaurant supplies and increased leverage on operating because of higher sales.

Marketing expense as a percentage of revenue increased 40 basis points to 1.4%, driven by our new national level marketing initiatives. Occupancy costs as a percentage of revenue increased 20 basis points to 7.2%, primarily due to higher rental expense at certain newly opened restaurants in larger markets as well as higher real estate taxes overall.

General and administrative expenses increased to $5.9 million in the second quarter compared to $5.2 million in the same period last year, driven by performance-based bonuses and to a lesser degree by increases in management salaries and equity compensation. As a percent of revenues, G&A increased 30 basis points to 5.2%. In summary, net income for the second quarter of 2019 was $6.2 million or $0.30 per diluted share compared to $6.5 million or $0.38 per diluted share in the same period last year.

During the second quarter of 2019, we did incur costs of $0.2 million net of tax or $0.01 per diluted share related to closing two restaurants during the first quarter of 2019 as well as $0.6 million net of tax or $0.04 per diluted share related to a legal settlement. As a result, adjusted net income for the second quarter of 2019 was $7.1 million or $0.42 per diluted share compared to $6.5 million or $0.38 per diluted share in the same period last year. We ended the quarter with $11.8 million of cash on the balance sheet, and we currently have no debt.

With that, we will now review our outlook for 2019. We have raised our expectations for the full year earnings per share to between $0.93 and $0.97 from $0.91 and $0.95 per diluted share for 2019. This compares to 2018 adjusted earnings per diluted share of $0.88.

Our guidance is based on the following updated assumptions: We continue to expect comparable restaurant sales growth for the year of 1.5% to 2.5%. We expect restaurant pre-opening expenses of approximately $3 million versus a previous range of $2.1 million to $2.9 million. We expect G&A expenses of between $23.6 million and $24.1 million. Our effective tax rate is expected to range between 0% to 5%. And we are modeling annual weighted average diluted shares outstanding of 16.9 million shares to 17 million shares versus a previous range of 17 million shares to 17.1 million shares. We expect to open six new restaurants this year, five of which have already been completed, versus a previous range of five to seven.

And lastly, our capital expenditures net of tenant improvement allowances are now estimated to range between $26 million and $29 million versus a previous range of $24.5 million to $30.7 million.

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

Steve Hislop -- Chief Executive Officer

Thanks, Jon. While we are pleased with the trajectory of our sales trends, we still have more to accomplish to improve our store-level profitability. To that end, we are confident in -- the initiatives we put in place along with our disciplined development strategy will benefit us in the years to come.

In closing, I'd like to thank all of our Chuy's employees. None of these accomplishments would be possible without their hard work and dedication in delivering the Chuy's experience to our guests every day.

With that, we are happy to answer any questions. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll go first to Mary Hodes with Baird.

Mary Hodes -- Robert W. Baird -- Analyst

Good afternoon. Thanks for taking the question. Could you provide a little bit more color on the factors that drove the improvement in the labor line and how sustainable do you think that is as you look to the second half of '19?

Jon Howie -- Vice President and Chief Financing Officer

Hi, Mary. Thanks for the question. This is Jon. We continue to believe that our management training labor will be down obviously with the number of stores that we're opening up. We continue to see like we are talking about the increased efficiency in the new stores, although we're only opening one more store in the last half of the year. We opened one up right at the first of Q3. So we only have one more left.

And then with that against about four to five others that we opened up last year, we should have some labor efficiency in the back half of the year compared to the previous year. So yes, a long-winded answer, but we expect to see maybe not as much as we saw this quarter, but we still anticipate having some leverage on that line item in the back half.

Mary Hodes -- Robert W. Baird -- Analyst

Okay. Thanks for taking the question.

Jon Howie -- Vice President and Chief Financing Officer

Thank you.

Operator

Well, now take a question from Will Slabaugh with Stephens Inc.

William Slabaugh -- Stephens, Inc. -- Analyst

Yeah. Thanks, guys, and congrats on the quarter. Your same-store sales growth implies a pretty nice ramp after the wet weather. It hurt you in April to start the quarter off. So I was hoping that you would help us understand what you saw in the period from a trend perspective as well as what you might have seen in the quarter-to date-period.

Jon Howie -- Vice President and Chief Financing Officer

Yeah. Will, this is Jon. We saw after -- like, we were saying, we are about flat to little negative in the fourth period, and that was about 235 basis points impact related to weather and the timing of Easter. We also saw about 30 basis points in total in five and six related to weather as well. But we did see those pop back similar to the trends we saw in the first quarter. So they averaged in five and six right around 2, 8 with the highest one being in period five and slightly down. So 3, 1 in period five and 2, 4 in period six. And we saw that trend continuing in period seven.

William Slabaugh -- Stephens, Inc. -- Analyst

Great. And then a follow-up on the revenue. The -- really looks like a nice improvement you saw from stores that were open 12 months or less that you put in the press release. I think that's the highest rate of growth year-over-year we've seen in a while. Can you talk a little bit more about what's driving some of the stronger volumes on a relative basis in some of you newer stores? How much of that has to do with the outperformance of the new stores versus maybe some of the softer performance from last year in some newer markets?

Jon Howie -- Vice President and Chief Financing Officer

Well, I think you just hit the nail on the head. It's a little of both. We have a lot of those newer stores that are now in our comp base. We saw about a 60 basis point headwind in our comp sales related to the new stores rolling in to the quarter in the second quarter. And that is being -- that's higher even in the seventh -- or in the third quarter. We're seeing that at about 100 basis points. So those are now out of that incremental base. And what you're seeing mainly in the incremental base are the five stores that we opened up in the current year. And like we said earlier, these 5 stores were targeted into markets with proven high AUVs. And they've opened up right at our expectations or exceeding our expectations. So we're very pleased with those openings.

William Slabaugh -- Stephens, Inc. -- Analyst

Great. Thanks, Jon.

Operator

We'll now take a question from Chris O'Cull with Stifel.

Christopher O'Cull -- Stifel Financial Corp. -- Analyst

Yeah. Thanks. Good afternoon, guys. Just a follow up on the new store comments. I mean, Steve, given the performance, is there an opportunity to open more units next year than this year?

Jon Howie -- Vice President and Chief Financing Officer

I'll tell you, Chris, right now I'm probably in the range of still five to seven, again in 2020. One thing I've mentioned and I've mentioned it for a while, I think the key thing for us and the health of our business is I want same-store customer counts increases, and we're not quite there yet and we're working real, real hard on that and that will be the main focus. So you will probably see us right in that five to seven-store range next year.

Christopher O'Cull -- Stifel Financial Corp. -- Analyst

Okay. And then, Jon, was the upward revision to the earnings guidance based on the better labor cost outlook?

Jon Howie -- Vice President and Chief Financing Officer

Well, as you know, we beat the earnings, but we didn't up it that -- as much as what we beat the earnings. And the reason for that is really the upward pressure on cost of sales and offset a little bit by labor. I mean, right now, in the third quarter, we're running about 110 basis points over last year in cost of sales mainly related to produce, and so we could see that trend continuing through the third quarter and we expect it to come down a little bit in the fourth quarter. But that's why we're projecting cost of sales or commodity costs in the three to four range versus the one to two earlier. It's just -- I think, everybody knows about the avocados, onions, and now we're seeing a little pressure in dairy as well.

Steve Hislop -- Chief Executive Officer

And another thing on top of that, Chris, as you probably saw, a little bit more in pre-opening because at the beginning of next year, in the first quarter, we're going to open like three to four restaurants right off the beginning of the year, which we'll have some pre-opening at the end of the third quarter that will be expensed.

Christopher O'Cull -- Stifel Financial Corp. -- Analyst

Okay. That's helpful. And then, just the check growth was greater in the quarter compared to what you had last quarter. Can you explain what drove that check growth? Do you guys take additional pricing maybe?

Jon Howie -- Vice President and Chief Financing Officer

We didn't. What we had was we had about 30 or 40 basis points in mix related to that. And then, when we did our price increase based upon our comparable store base, we've had additional stores that entered that comparable store base in the Tier 3 and Tier 4, where we took a little more pricing. And so, we're -- I think, we said previously, about 3%. We've actually -- the effective rate is about 3.5%, and now we've got about 40 basis points of mix on top of that. And the mix is coming from our, what we call, bulk ordering and mainly in catering and to-go, and that's not entrees, but creamy jalapeno, the queso and things like that.

Christopher O'Cull -- Stifel Financial Corp. -- Analyst

Great. Thanks, guys.

Jon Howie -- Vice President and Chief Financing Officer

Thank you.

Operator

We'll take our next question from Andrew Strelzik with BMO Capital Markets.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Hey. Good afternoon. You're about six months into running that a little bit higher pricing than you normally run. How do you feel like the brand is absorbing that? And do you feel like it's having any impact on traffic? If not, how does that kind of weigh into your thinking on the pricing power of the brand?

Steve Hislop -- Chief Executive Officer

Yeah. We're six months into it. We're pleased with it. And as far as customer counts, take away the headwind and take away the weather, it's probably flat now, where that's an improvement from the prior year. So we're excited about it as we move forward. As always, though, as we continue to look at our menus, I look at market specific, I look at all our competitive set to make sure we have the value prop in the market, that's going to always drive what percent it will be. It just so happened a lot over the last two years, a lot of guys went up a lot higher than the 3.5% to 4%. So we had a little bit more in the value play within the markets. But we'll do that study again as we move forward. That's the number one indicator on how much price we'll take, is what the market will bear, and then we'll move from there and deal with the internal cost pressures that we see coming up in 2020.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Okay. And can you talk a little bit more about how things are trending in the off-premise business, in particular around Olo? And I'm curious, once you started marketing that I believe it was supposed to be in May. Did you see an inflection in how things have been trending there?

Jon Howie -- Vice President and Chief Financing Officer

Yes. We saw -- Andrew, this is Jon. We saw the adoption rate go up, which we've been very pleased with. We started promoting that in period five. And we were seeing 13% to 14% of overall to-go, and now that's around 17% to 18%. So we saw that, definitely the adoption rate, go up on that. When we fully implement our Dispatch by the end of the year, hopefully, we'll even see that go up further.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Okay. And then, my last question. It feels like the news flow around closings within the industry and bankruptcies in the industry with some of the midsized players have picked up recently. I guess I'm curious, do you feel like that creates a better operating environment for Chuy's or does it not impact you guys one way or the other? It just feels like maybe brands, there could be some switching with. I'm not sure if it's necessarily in your markets, but I'm curious if you think that actually creates a better operating environment for you.

Steve Hislop -- Chief Executive Officer

I mean, right now, I don't think it's really changed. The operating environment has been the same for -- it's been a tough environment for a while and it's continuing to be tough as we move forward. I think the people that really balance over the next year the off-premise sales and the inside four-wall sales and really balanced that on an execution standpoint will be the ones that end up making the move on the customer count. So that's what we're focused on.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Great. Thank you very much.

Jon Howie -- Vice President and Chief Financing Officer

You're welcome.

Operator

We'll now take a question from Nick Setyan with Wedbush Securities.

Nick Setyan -- Wedbush Securities -- Analyst

Thank you. Congrats on a great quarter. In terms of the labor initiatives, are there -- is there more to come or do you feel like you kind of right-sized things and maybe there's that kind of in the rearview mirror or is there more opportunity there?

Steve Hislop -- Chief Executive Officer

I think, long-term, Nick, over the next year-and-a-half, two years, we have a lot of initiatives that we're just really getting started, what we call smart prep and looking at some different pieces of equipment and technology as we move forward. I don't think that's something we're ever going to stop working on. To be honest with you, with the way technology and the world's changing as fast as it is now, a lot of it's been through -- like Jon said, we have some leverage, probably not as much as we had in the second quarter and the rest of the year. But that's something we'll always continue to work on, whether it be the power systems or the smart prep or equipment.

Nick Setyan -- Wedbush Securities -- Analyst

Got it. In terms of openings next year, any new markets?

Steve Hislop -- Chief Executive Officer

No new markets. As I mentioned in my script, I think once we've had the tried-and-true last piece of our whole strategy of real estate, when I get the psychoanalysis of that, we'll start really testing that and really looking at 2020 stores. So until that's really implemented, I probably will not be going into any new markets.

Jon Howie -- Vice President and Chief Financing Officer

2021 stores.

Steve Hislop -- Chief Executive Officer

2021.

Nick Setyan -- Wedbush Securities -- Analyst

Got it. And the last question. I know you guys said we haven't really committed to a pricing strategy in 2020 yet. But is it fair to assume that even if it is not like mid 3%, it's probably not going to be down in the mid 1% range?

Steve Hislop -- Chief Executive Officer

Again, I'd probably say yeah, but I'd again -- I'll go ahead and do what the market bears. But I mean, obviously everybody is dealing with the information we are. So I think you'll see a competitive set out there, probably match or get close to what they did this year. And so I don't think anybody's going to be around that 1.5% to 2%. So I think the value spread will be a little higher than the mid-1%s.

Nick Setyan -- Wedbush Securities -- Analyst

All right. Got it. Thank you very much.

Steve Hislop -- Chief Executive Officer

You're welcome.

Operator

[Operator Instructions] We'll take our next question from Andy Barish with Jefferies.

Alexandra Chan -- Jefferies -- Analyst

Hi. This is Alex on for Andy. Maybe if I could approach that [Indecipherable] question a little bit differently, I believe at one point you talked about implementing some menu design research, maybe better highlighting existing value or other things around the menu. Anything there?

Steve Hislop -- Chief Executive Officer

Great question. Yeah, it's a great question. Right now, we do have a menu change happening probably at the end of October. It's not going to be any items though, it's really more design and really using our strategy that we did from our study on really highlighting some certain items, grouping them a little bit differently, where they're at on the page a little differently. We thought that was aplenty on the first rate looking at our entire menu as this, really the design. And so -- and we did the focus groups and all that stuff. So that was exciting. So we're excited about that. And we might look at, at the beginning of 2020 when we do our price change, which we usually do at the beginning of the second period every year, that you might have a couple add-ons and a couple deletes at that particular time. But right now, it'll only be a design change in October -- at the end of October.

Alexandra Chan -- Jefferies -- Analyst

Got it. But do you think that helps keeps the mix kind of in that slightly positive, say, 30- to 40-basis-point range, what you saw in second quarter?

Jon Howie -- Vice President and Chief Financing Officer

I do, but the design changes that Steve's talking about would be a whole different mix change. Because what I was talking about mix is really from the bulk that is off menu items. So that's really all set to go and that's not even on the menu.

Steve Hislop -- Chief Executive Officer

And that made the biggest jump. As I mentioned, I think, in the call, again you saw our catering, our bulk number was $1.5 million second quarter this year, and that's up against $400,000 in quarter 2 2018. So that was the big mix change.

Alexandra Chan -- Jefferies -- Analyst

Got it. That makes sense. And then just thinking about the loyalty program that you've mentioned, could you give a little bit of color into how the table management system might play into that and do you feel like that's a big unlock into driving in-store frequency or more off-premise? And is that cost included in the G&A guide?

Jon Howie -- Vice President and Chief Financing Officer

The cost is included in the G&A guide. And what we're looking at is more -- from a loyalty standpoint, we're looking more at engagement versus reward when we're looking at loyalty program. Although we're going to do some more research as we said here in the back half on all different dinings -- all different types of loyalty programs. But with that being said, the new table management system is allowing us to track customers, track what -- how many times they come in, track what they eat.

So specifically, let's say, we have a customer that likes our Elvis Fried Chicken and we come out with a new Elvis Fried Chicken Salad. We can specifically segment the marketing and go after those people that like our Elvis Fried Chicken and recommend coming in to try our new Elvis Fried Chicken Salad. Or if a customer hasn't come in for two months, we can invite them back in with a free queso or something like that. So it really allows us to segment our customers in what they've ordered and what their experience has been, and invite them back in or just really have engagement with our customer to make sure that they feel like a VIP to Chuy's.

Steve Hislop -- Chief Executive Officer

Yes, and obviously increase our email addresses as we move forward with Wisely.

Alexandra Chan -- Jefferies -- Analyst

Got it. Thanks.

Steve Hislop -- Chief Executive Officer

Thank you.

Operator

We'll now take a question from Dan Docherty with Raymond James.

Daniel Docherty -- Raymond James -- Analyst

Hi, guys. This is Dan Docherty on for Brian Vaccaro. A quick question. I believe there have been some new value initiatives during the week. I'm not sure if that's systemwide or in certain regions, but any color on how those are performing?

Steve Hislop -- Chief Executive Officer

Yeah. That's definitely not systemwide and it's not a Chuy's strategy per se. But in certain stores where we want to get some -- a little bit more awareness, I think, because we're newer to the markets, we did offer a Tuesday night, which is a taco night, that's -- and we offered Wednesday as we have fajita nights at a little discounted price, and we do $5 margaritas all the time every day. And those are the three items and those are the three days, and I'm pleased with how they're done. We've increased some traffic in those stores, which is our main thing. Obviously, the most expensive seat is the one where no one's butt's in it. So that's what we're doing there. And it's improved. It's improved, as said, and we're going to run that at least for a year in those stores.

Daniel Docherty -- Raymond James -- Analyst

Okay. Great. And then one other quick one, which is what was off-premise sales mix in 2Q?

Jon Howie -- Vice President and Chief Financing Officer

13.4%, and it was up actually 13.4% as well.

Daniel Docherty -- Raymond James -- Analyst

Okay, great. Thank you.

Jon Howie -- Vice President and Chief Financing Officer

Thank you.

Operator

We'll now take a question from Bob Derrington with Telsey Advisory.

Robert Derrington -- Telsey Advisory Group LLC -- Analyst

Yeah. Thank you. Steve, I think we saw earlier today some of the weakest trends that I've seen out of Black Box, specifically within Texas. I think the industry comp trends were down about 2.7%, with traffic down almost 6.6%. Obviously, your business doesn't sound as though it's seeing such dire trends. Steve, given what you're seeing in the market down in Texas, what's happening down there versus the success that you continue seemingly to have right now?

Steve Hislop -- Chief Executive Officer

Yeah. This has obviously been our home market, and I think as you -- we talked about last conference call, we did see some softening in Houston, and that's probably -- part of the reason -- although great AUVs in Houston, but that's also why we did the focus market at the beginning of the second quarter there, the marketing and on top of the paid -- social paid digital, and we felt like that has a nice little rebound for us in Houston, where they're doing very, very well now. But our Austin, Dallas have always continued to be some of our strongest markets in the company.

Robert Derrington -- Telsey Advisory Group LLC -- Analyst

That's really encouraging. Can you give us any kind of a read on how, specifically within Texas, you've done versus the industry trend? Any kind of color?

Jon Howie -- Vice President and Chief Financing Officer

Well, I mean, obviously, the industry trends that you said compared to, like Steve said, our Texas stores are doing better than the average of our comp sales. So that I'll give you a little indication of where that's trending. So they are definitely doing better than our -- like I said, in July running over 2%

Steve Hislop -- Chief Executive Officer

Yeah. And having said that, I'm kind of pleased with the overall trends of the whole Southeast actually, right now take away the weather that a lot of people have been mentioning for quarter two, specifically the fourth period of that. So we're kind of excited.

Robert Derrington -- Telsey Advisory Group LLC -- Analyst

Terrific. Thanks, guys.

Steve Hislop -- Chief Executive Officer

Thanks, Bob.

Operator

And it appears there are no further questions at this time. I'd like to turn the conference back to Steve Hislop for any additional or closing remarks.

Steve Hislop -- Chief Executive Officer

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

Operator

[Operator Closing Remarks]

Duration: 33 minutes

Call participants:

Jon Howie -- Vice President and Chief Financing Officer

Steve Hislop -- Chief Executive Officer

Mary Hodes -- Robert W. Baird -- Analyst

William Slabaugh -- Stephens, Inc. -- Analyst

Christopher O'Cull -- Stifel Financial Corp. -- Analyst

Andrew Strelzik -- BMO Capital Markets -- Analyst

Nick Setyan -- Wedbush Securities -- Analyst

Alexandra Chan -- Jefferies -- Analyst

Daniel Docherty -- Raymond James -- Analyst

Robert Derrington -- Telsey Advisory Group LLC -- Analyst

More CHUY analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.