Einstein Noah Restaurant Group Inc.
) recently reported third quarter 2012 adjusted earnings of 21
cents per share. The results were in line with the Zacks
On a GAAP basis, including expenses related to the strategic
alternatives review process, earnings per share were 20 cents in
the reported quarter versus 17 cents in the year-ago quarter.
Total revenue nudged up 1.9% year over year to $105.5 million but
missed the Zacks Consensus Estimate of $106.0 million. The uptick
reflects a system-wide comparable restaurant sales increase of
Segment-wise, company-owned restaurant sales inched up 3.4% to
$95.4 million, while Manufacturing and Commissary revenue
declined 14.4% to $7.5 million, hurt by the recent commissary
closures. Franchise and License related revenue grew 4.6% to $2.6
Gross profit expanded 9.5% year over year to $20.7 million in the
quarter, primarily due to cost containment initiatives.
Cost-saving initiatives combined with positive comps led to a
gross margin expansion of 150 basis points (bps) to 19.7%.
Total company-owned restaurant costs declined 20 bps to 82.8%, as
cost of goods plummeted 210 bps and labor costs dipped 40 bps.
These benefits were partially offset by an increase of 60 bps in
rent, a 120 bps hike in other operating costs and a 150 bps spike
in marketing costs.
At the end of the quarter, the company had 797 restaurants, out
of which 450 were company owned, 94 were franchised and 253 were
In the reported quarter, Einstein Noah opened two company-owned,
one franchised and 17 licensed units. It also shut down a total
of 6 units.
Einstein Noah ended the quarter with cash and cash equivalents of
approximately $12.7 million and a debt burden of $68.6 million.
For fiscal 2012, the company plans to open 66-72 restaurants
(previous guidance was 60-80). Capital expenditures are estimated
at $24-$26 million. Commodity inflation for the full year is
expected to remain in the 2%-3% range.
Lakewood, Colorado-based Einstein Group's performance has been
faltering in the last few quarters. After missing the earnings
estimate in the last quarter, the company just about matched it
this quarter. The revenue performance also remained choppy year
Based on recent performances, we remain cautious on the stock at
the current level. Moreover, stiff competition and weak consumer
confidence amid a sluggish economy also support our view on the
stock. Although the company considers an assessment of strategic
alternatives to bolster shareholders' return, the program is yet
to deliver any concrete results. Besides, the probability of
increased commodity inflation also lurks in 2013.
Einstein Noah Restaurant Group currently carries a Zacks #4 Rank,
which translates into a short-term 'Sell' rating. However, its
Panera Bread Co.
) holds a Zacks #2 Rank, translating into a short-term 'Buy'
EINSTEIN NOAH (BAGL): Free Stock Analysis
PANERA BREAD CO (PNRA): Free Stock Analysis
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