BJ's Restaurants Inc.
) third-quarter 2013 earnings of 13 cents per share missed the
Zacks Consensus Estimate of 17 cents by 23.5% as well as the
year-ago level by 45.8%. Lower-than-expected top line and margin
shortfall led to the year-over-year decline in earnings.
Inside the Headline Numbers
Revenues in the reported quarter grew 7.4% year over year to
$188.2 million, which lagged the Zacks Consensus Estimate of
$195.0 million. While an 11% increase in operating weeks led to
the year-over-year revenue growth, we believe lower comparable
store sales resulted in the revenue miss.
A 2.2% decline in comparable restaurant sales in the quarter
compared unfavorably with an increase of 2.3% in the prior-year
quarter. As per management, lack of product innovation dented
comps and consequently sales. Operating margin was down 320 basis
points (bps) year over year to 1.9%, reflecting a spike in the
overall cost structure.
The company opened 6 restaurants during the third quarter. At
quarter-end, the company had 140 units in 15 states.
Out of the 6 restaurant openings planned for the fourth
quarter, 3 are already operational. The company's 2013
developmental pipeline consists of as many as 17 new restaurants.
Management now expects to open 17 to 19 new restaurants in 2014.
Two-thirds of these new restaurants will be developed under the
new prototype, which will cost the company $1 million less than
the current prototype.
Over the next five years, BJ's Restaurants intends to double
its presence. BJ's believes that there is room for at least 425
restaurants in the U.S.
Management is set to bring in a new menu beginning November
and in the first quarter of 2014, which along with other
initiatives will help in repositioning the brand.
We remain cautious on BJ's Restaurants owing to four
successive quarters of bottom line decline. Comps and sales
performance has been quite disappointing.
However, on a slightly positive note, the company remains on
an expansion spree, which should provide it with greater scale
and cost efficiency over the long term. Focus on smaller
prototypes will likely generate better returns for the company
ahead. BJ's Restaurants currently retains a Zacks Rank #3
Companies from the restaurant sector that are worth a look
Bob Evans Farms, Inc.
Cracker Barrel Old Country Store, Inc.
Dunkin' Brands Group Inc.
), all carrying a Zacks Rank #2 (Buy).
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