The Olympics were good to Fogo de Chao Inc.
The two-week event, held in Rio de Janeiro in August, drew strong traffic at the chain’s locations in Rio, helping the company beat same-store sales and earnings expectations in the third quarter ended Oct. 2.
Same-store sales increased a modest 0.6 percent overall, while traffic increased 0.9 percent. Fogo de Chao stock increased more than 9 percent through early Tuesday afternoon trading.
“The Olympics were an exciting time for the world and Fogo,” Fogo de Chao CEO Lawrence Johnson said in an earnings call Monday.
Johnson noted that the chain’s flagship restaurant, in Rio de Janeiro, served more than 11,000 customers in a single week.
“This is the brand’s new record high for guest count for a single week,” he said.
Yet the company’s U.S. same-store sales fell 1 percent in the quarter amid a “challenging” sales environment.
“Like the industry, we’re facing a challenging sales environment,” George McGowan, president of Fogo de Chao, said during the call. “The plentiful supply of dining choices, the current gap between food-at-home deflation, and current food-away-from-home price inflation. An uneasy geopolitical landscape is making consumers more discerning with their dining dollars.”
Still, he said, the company’s efforts to drive traffic, including its lunch program and a Brazilian Brunch offering, are starting to show results.
On a two-year basis, same-store sales in the U.S. increased 1.8 percent in the period, 640 basis points higher than the chain’s competitors, based on Knapp-Track numbers, Fogo de Chao said.
Traffic has risen 4.5 percent on a two-year basis, which is 740 basis points ahead of the upscale-dining sector over the same period. McGowan said lunch traffic bested competitors by 840 basis points in the quarter, and lunch sales outpaced the sector by 990 basis points.
Revenue in the quarter increased 13.2 percent, to $69 million, from $61 million the previous year.
Net income was $4.5 million, or 16 cents per share, a 43-percent decline from $8 million, or 28 cents per share, the previous year. Both revenue and profit were ahead of what Wall Street analysts expected, according to Factset, a provider of financial research solutions.
Fogo de Chao operates 42 locations, plus one joint-venture restaurant in Mexico City. Most of the company’s locations are in the U.S. and Brazil.
Executives suggested that there remains “a lot of uncertainty” in the economy. They noted that the company’s large groups are currently on track with expectations, and that reservations are “on pace to do well.”
But, “We’re just uncertain about walk-in traffic,” McGowan said. “So we’re being aggressive around capturing revenue through large groups.”
McGowan also said what many people in the industry — and the country, for that matter — are thinking.
“I think the biggest thing that everybody is waiting for is what’s going to happen (on Election Day,) just to get it behind us,” he said.
Correction: Nov. 9, 2016 Due to an editing error, an earlier version of this story misstated the location of Fogo de Chao's flagship restaurant. It is in Rio de Janeiro.
Contact Jonathan Maze at [email protected]
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