BJ's Restaurants Inc.
) reported third-quarter 2012 adjusted earnings of 24 cents per
share, which fell short of the Zacks Consensus Estimate of 28
cents, but came in line with the year-ago level.
On GAAP basis, earnings came at 24 cents per share versus 22
cents recorded in the year-ago period. Despite double-digit
growth in the top line, the bottom line failed to match up to the
expectations due to a higher cost structure.
Inside the Headline Numbers
Revenues in the reported quarter grew 16.0% year over year to
$175.2 million, which lagged the Zacks Consensus Estimate of
$178.0 million. The increase was attributable to modest growth in
both comparable restaurant sales and new restaurant openings.
Comparable restaurant sales grew 2.3% compared with 6.5% in the
prior-year quarter reflecting growth for the11th consecutive
To strengthen its position amid a cut-throat setting, BJ's
made notable investments in the quarter like the launch of a
loyalty program, pizza upgrade and the rollout of beer education
in order to give an impetus to the sales of BJ's proprietary
Operating margin was down 60 basis points (bps) year over year
at 5.1%, reflecting an 80-bps spike each in occupancy and
operating costs as well as labor and benefits costs, and 30-bps
increase in depreciation and amortization. These were partially
offset by a fall of 20 bps each in restaurant opening costs as
well as general and administrative expenses and flat cost of
The company opened four restaurants during the third quarter.
At quarter-end, the company operated 125 units.
BJ's has already chalked out its unit opening plan for the
remaining quarter of 2012. Five new units are slated for the
final quarter, of which two units have already been unveiled in
Texas and Florida. Rest will be opened before Thanksgiving.
The company's 2013 developmental pipeline consists of as many
as 17 new restaurants. This pipeline also includes the shift of
one of the company's small format "Pizza and Grill" restaurants
in Eugene, Oregon to a new site in Eugene, where it can house a
larger-format "Brewhouse" restaurant.
BJ's ended the quarter with cash and cash equivalents of $38.6
million and shareholders' equity of $362.3 million. As of October
2, 2012, BJ's long-term debt liability was nil.
We remain cautious on the stock at the current level based on
the top- and bottom- line miss as well as the decelerating growth
in comps and margins. The slump in broader market took a toll on
BJ's performance in the third quarter. A set of macro issues like
the national political conventions and higher gasoline prices in
California kept consumers pre-occupied and made them dine out
However, we believe BJ's will be able to drive its top-line
growth momentum on the back of operating efficiencies, innovative
offerings, several sales-building measures over the long
BJ's Restaurants competes with
Darden Restaurants Inc.
) and currently retains the Zacks #3 Rank, which translates into
a short-term 'Hold' rating. We are maintaining our long-term
Neutral recommendation on the stock.
BJ'S RESTAURANT (BJRI): Free Stock Analysis
DARDEN RESTRNT (DRI): Free Stock Analysis
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