Frisch's Restaurants Inc.
) recently posted second quarter 2012 earnings of 56 cents per
share, in line with the Zacks Consensus Estimate. Reported earnings
also outpaced the year-ago earnings of 49 cents per share. The
year-over-year earnings growth was driven by higher same-store
sales and margin expansion at Golden Corral segment.
Inside the Headline Numbers
The restaurant chain reported total revenue of $70.7 million in
the second quarter, up only 0.1% year over year, owing to the
shutdown of six underperforming Golden Corral stores in August
2011. However, excluding the closures, revenue jumped 4% driven by
strong performance of Golden Corral segment.
The company primarily operates under two segments namely, Big
Boy - full service family-style restaurants and Golden Corral -
grill buffet style restaurants. Same-store sales crept up 0.4% at
Big Boy as traffic dipped 2.4% and climbed 7.8% at Golden Corral
due to a 4.4% rise in guest count. Sales inched up 2.5% at Big Boy
segment, benefiting from unit growth, but sales plunged 5.1% at
Golden Corral segment due to the closure of six units.
The Cincinnati, Ohio-based company's gross margin fell 20 basis
points (bps) to 10.3% as food and paper cost as a percentage of
sales rose 90 bps to 35%, payroll and related cost spiked 40 bps to
33% and other operating cost leaped 30 bps to 21.7%. Gross profit
of the Big Boy segment dropped 6.6% due to food cost inflation, but
gross profit of Golden Corral expanded 39.1% on same-store sales
growth and shutdown of underperforming restaurants, partially
offset by food cost pressure.
During the quarter, Frisch's opened one Big Boy restaurant. The
company currently operates 95 company-owned Big Boy restaurants and
25 franchised Big Boy restaurants. The company also operates 29
Golden Corral restaurants.
Frisch's currently has no plans to open any Golden Corral
restaurants, but is making efforts to open additional Big Boy
restaurants, but not before summer 2012.
At the end of the quarter, cash and equivalents were $1.7
million, long-term debt was $19.2 million and shareholders' equity
was $125.1 million.
We remain optimistic on the stock based on the company's ability
to post profit and enhance shareholders' value via dividends every
year since 1960. However, stiff competition and food cost inflation
are expected to remain headwinds for the company. The Zacks
Consensus Estimates for 2012 and 2013 stand at $1.97 and $2.07,
One of Frisch's closest peers,
BJ's Restaurants Inc. (
reported third-quarter 2011 adjusted earnings of 24 cents per
share, in line with the Zacks Consensus Estimate and higher than
the prior-year earnings of 20 cents. The upside was attributable to
double-digit growth in the top line and strong comparable
restaurant sales growth.
BJ'S RESTAURANT (
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