Einstein Noah Restaurant Group Inc.
) has recently reported first quarter 2012 adjusted earnings of 21
cents per share, which handily surpassed the Zacks Consensus
Estimate of 11 cents as well as year-ago adjusted earnings of 8
On a GAAP basis, including restructuring expenses, earnings were
19 cents per share in first quarter 2012 versus 7 cents in the
Total revenue grew 3.6% year over year to $104.9 million. The
uptick reflects system-wide comparable restaurant sales increase of
1.1% aided by a 5% rise in average check partially offset by
declining transactions. Comparable restaurant sales (comps) at
company-owned stores nudged up 1.1%. Franchisee and licensee
comparable restaurant sales were up 1.2% in the first quarter.
Segment-wise, company-owned restaurant sales grew 4.1% to $93.4
million, while Manufacturing and Commissary revenue declined 5.9%
to $9.0 million and Franchise and License related revenue shot up
20.5% to $3.0 million.
Gross profit expanded 26.8% year over year to $22.6 million in
the quarter primarily on lower marketing costs, manufacturing and
commissary costs and labor costs. Cost saving initiatives clubbed
with positive comps and higher pricing led to a gross margin
expansion of 400 basis points to 21.6%.
At the end of the quarter, the company had 777 restaurants, out
of which 447 were company owned, 91 were franchised and 239 were
Einstein Noah ended the quarter with cash and cash equivalents
of approximately $9.6 million and a debt burden of $72.3 million.
The company repaid nearly $1.9 million in the quarter. Free cash
flow was $4.6 million.
For fiscal 2012, the company plans to open 60 to 80 restaurants.
Expected openings include 8-12 company-owned units, 12-14 franchise
restaurants and 40-54 license restaurants. Capital expenditures are
estimated at $24-$26 million. Commodity inflation for the full year
is expected to remain in 2% to 3% range.
After missing the quarterly earnings estimate for the last three
quarters, the company swung back to profit since the fourth quarter
of 2011. Now, Einstein Noah Restaurant Group, which operates under
the Einstein Brothers Bagels, Noah's New York Bagels, and Manhattan
Bagel brands, considers an assessment of strategic alternatives to
bolster shareholder return.
These strategies also include the likelihood of a merger or sale
of the company. The decision had a positive impact on the
The company continues to concentrate on sales-driven initiatives
as well as cost-cutting measures to foster earnings growth.
Moreover, the company's unit expansion policy remains on track.
Lakewood, Colorado-based Einstein Group will also enjoy the payment
of minimum cash-taxes for the next several years. To counter
inflation, management locked in 81% of its wheat and 100% of its
2012 coffee needs at the current level.
However, we remain cautious about inflation, stiff competition
and unstable consumer confidence. We are maintaining our long-term
Neutral recommendation on the stock. Einstein Noah competes with
Kona Grill Inc.
EINSTEIN NOAH (BAGL): Free Stock Analysis
JAMBA INC (JMBA): Free Stock Analysis Report
KONA GRILL INC (KONA): Free Stock Analysis
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