Kona Grill Inc.
) first-quarter 2013 earnings of 12 cents per share beat the
Zacks Consensus Estimate by 9.1% but were 7.7% lower than the
year-ago earnings of 13 cents. A choppy sales environment coupled
with higher operating expenses resulted in the year-over-year
decline in earnings.
Total restaurant sales in the quarter were $23.5 million, down
2.3% year over year. The downside in sales can be traced back to
macro issues, inclement weather in Midwest and Northeast markets,
including restaurants closures due to snowstorms and heavy
snowfall in certain markets, which deterred consumers from dining
out. However, the results missed the Zacks Consensus Estimate of
Same-store sales (comps) fell 206 basis points (bps) owing to
lower guest traffic as volatile macroeconomic condition adversely
affected consumer sentiment. Moreover, tough comparisons due to
an early Easter this year and one less operating day from the
year-ago quarter also impacted sales.
Restaurant operating profit margins declined 120 basis points to
18.7% in the reported quarter attributable to higher proportion
of occupancy-related costs, labor expenses and cost of sales to
revenues. However, lower restaurant operating expense partially
compensated the decline in margins.
At quarter-end, Kona Grill owned and operated 23 restaurants in
16 states. The restaurateur expects to open 2 new units in 2013.
Second Quarter Guidance
For the second quarter of 2013, the company expects total
restaurant sales of $25.3 million, up 1.2% year over year. The
guidance indicates same-store sales growth to be around 1%.
Earnings per share are expected to range between 15 cents - 20
cents per share.
Kona Grill managed to beat the earnings estimate but missed out
on sales. Persistent slowdown in sales remains a concern. It has
been facing a sluggish sales environment for quite some time.
Although Kona Grill is resorting to several strategies like
offloading unprofitable locations, restaurant remodeling and
promotions in an attempt to accelerate traffic, any notable
impact is yet to be seen. An anemic economy and stiff competition
will continue to pose challenges going ahead.
Kona Grill currently retains a Zacks Rank #4 (Sell). However,
others players in the same industry, which look attractive at
current levels include
Cracker Barrel Old Country Store Inc.
The Wendy's Co
Burger King Worldwide Inc.
). While Cracker Barrel and The Wendy's carry a Zacks Rank #1
(Strong Buy), Burger King carries a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
KONA GRILL INC (KONA): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
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