Chuy's (CHUY), a Tex-Mex chain with locations primarily in the Midwest and Southeast, has fallen just over 50% from its November high, but the company looks well positioned to handle the coronavirus outbreak from a balance sheet standpoint, transitioning to delivery, with no debt and a solid balance of cash on hand. Revenues had still grown steadily, but YoY growth has fallen consistently, and net margins have shrunk.
Coronavirus Changes to Business Model
In response to the coronavirus outbreak, Chuy's "increased its cash position by drawing down the $25 million balance under its revolving credit facility….With the drawdown and existing cash, the company has over $28 million of cash and cash equivalents on hand." Chuy's has also taken steps to lower yearly expenses and operating costs as much as possible - 2020 store openings have been delayed or cancelled as a nonessential capex item, 40% of staff furloughed to reduce operating expenses and reflect decreases in sales volume, and stopped share buybacks for the year. These changes enacted by the company should provide it enough liquidity, given its lack of debt and planned decreases in nonessential expenses for the rest of the year, keeping just the skeleton of the business operating.
Chuy's states its business model brings "considerable value to our customers, with our average check of $15.74 as of December 29, 2019, which we believe is on the lower end of our casual dining peer group." Each restaurant has an in-house bar, and "alcoholic beverages constituted 18.1% of our total restaurant sales." Although the coronavirus impact has forced Chuy's to transition to selling through takeout and delivery in 92 of its 101 locations, some states are allowing the sale of alcoholic beverages in takeout and delivery with the knowledge that alcohol is a significant revenue driver
