Cosi Comps Turnaround in 4Q - Analyst Blog

By Zacks Equity Research,

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Deerfield, Illinois-based Cosi Inc. ( COSI ) recently reported a 2.6% rise in its system-wide comparable restaurant sales for the fourth quarter of 2011, after witnessing declining comps for two consecutive quarters.

The upside in comps was driven by new initiatives and seasonally mild weather conditions. In the month of December, which is the holiday period, comps crept up 8.2%. Comparable restaurant sales represent a key figure, which measures growth at restaurants in operation for more than 15 months.

Company-owned comparable restaurant sales inched up 0.9%, due to higher customer visitation. Moreover, same-store sales at franchise operated restaurants climbed 5.3%. The premium casual dining restaurant chain operator is expecting the same trend to continue for the first quarter of 2012.

Sales for the fourth quarter 2011 also rose on the back of one extra week of operation compared with the year-ago quarter, same-store sales growth and higher company-owned restaurant sales.

Total revenue, which comprises company-operated restaurant sales and franchise fees and royalties, jumped 3.3% year over year to $26.2 million. Sales also surpassed the Zacks Consensus Estimate of $24.0 million.

A traffic growth of 0.6% and an increase of 0.3% in average check resulted in a 2.8% upside in company-operated restaurant sales to $25.3 million. Franchise fees and royalty revenues increased 18.8% to $0.9 million.

We expect estimates to go up in the coming days based on encouraging fourth quarter sales results coupled with positive outlook for the next quarter. The Zacks Consensus Estimate for 2011 and 2012 are pegged at a loss of 12 cents and earnings of 2 cents, respectively.

During the third quarter of 2011, Cosi posted a 6.6% year-over-year decline in total revenue, as company-owned restaurant sales tumbled 6.8%. However, franchise fees and royalty revenues expanded 11.0% year over year. In the reported quarter, system-wide comparable sales slid 3.0% from the year-ago quarter due to sluggish consumer spending. Comps at both company-owned restaurants and franchised restaurants were down 3.0% year over year.

The company is slated to release its fourth quarter 2011 results on March 29, 2012. Its prime competitors include Panera Bread Co. ( PNRA ) and Starbucks Corp. ( SBUX ). Cosi currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Underperform recommendation on the stock.

COSI INC ( COSI ): Free Stock Analysis Report
PANERA BREAD CO ( PNRA ): Free Stock Analysis Report
STARBUCKS CORP ( SBUX ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: COSI , PNRA , SBUX

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