IRG

Ignite Restaurant Group, Inc. (IRG)

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Industry: Consumer Services
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Ignite Restaurant Group (IRG)

Q1 2013 Earnings Call

May 7, 2013 5:00 PM ET

Executives

Ray Blanchette - Chief Executive Officer

Michael Dixon - President and Chief Financial Officer

Analyst

Karen Holthouse - Credit Suisse

Phan Le - Lazard

David Tarantino - Robert W. Baird

Bryan Elliott - Raymond James

Christopher O'Cull - KeyBanc

Presentation

Operator

Good afternoon, everyone, and welcome to the Ignite Restaurant Group first quarter 2013 earnings conference call. (Operator Instructions)

Before I turn the call over to management, I would like to note for you that portions of this call deals with forward-looking information. These statements reflect management's expectations for the future. The company's actual results may differ materially from these expectations. Management refers all of you to today's press release and the company's recent filings with the SEC for a more detailed discussion of the risks that could impact future operating results and financial conditions.

On the call today we have Ray Blanchette, Chief Executive Officer of the company; and Michael Dixon, President and Chief Financial Officer.

At this time, for opening remarks, I would like to turn the call over to Michael Dixon, President and Chief Financial Officer. Please go ahead, sir.

Michael Dixon

Good afternoon and thank you for joining us today. By now everyone should have accessed to our press release, which we issued this afternoon. The release, which covers our first quarter fiscal 2013 can also be found our website under the Investor Relations section. Additionally I would encourage everyone to review our related 8-K and 10-Q filings with the SEC for greater detail on the information included in our press release and on today's conference call.

Our agenda for the call will be as follows. Ray will provide an overview of our business, and then I will discuss the financial results. We will have time at the end for questions, but we'd like to finish up in about an hour. Before I turn the call over to Ray, let me put out the change in our fiscal quarter calendar.

Beginning with the first quarter of fiscal 2013, we adjusted our quarterly reporting calendar to four 13-week operating periods. Previously, the first three quarters of our fiscal year consisted of 12 weeks, and the fourth quarter consisted of 16 weeks. As a result to this change, financial results for the 13-week quarter ended April 1, 2013, may now be directly comparable to those of the corresponding 12-week quarter ended March 26, 2012. Now, we'll point out the impact of this as we go through the numbers for the quarter.

Now, I'd like to turn the call over to Ray Blanchette, our Chief Executive Officer.

Ray Blanchette

Thanks, Mike, and thanks everyone on the phone for joining us today. I'll start with a couple of big picture items. Shortly after the first quarter ended, we closed on the Macaroni Grill acquisition. With the closing behind us, I feel very good about the future of Ignite.

We have three great brands, a solid infrastructure and a robust development pipeline. Our revised organizational structure gives us three strong brand presence, all focused on our excellence, and best-in-class infrastructure working on menu innovation, brand awareness and restaurant support, here at the restaurant support center.

Consumer environment and values have been challenging, but I'm pleased we are well-positioned to profitably grow the Ignite business. As for the first quarter of 2013, well unfortunately after four-and-a-half years of positive same-store sales growth, that came to an end this quarter.

I am certainly not happy with these sales results, but it seems headwinds and facing a casual dining phase in January and February in particular, combined with the positive 5.3 that we rolled against in the prior year, we're just a bit more than we could overcome this quarter. So we ended up the quarter with our reported negative 1.4 in comp stores sales.

As I am sure, you probably noticed if you read the release, we disclosed comp sales by brand for the first time. As you'd expect Joe's Crab Shack represents a vast majority of our revenues and drives our overall comp sales results. Joe's posted down 2 comp stores sales for the quarter and down 3.8 in traffic offset by 1.8 benefit between price and mix.

Our opportunity at Joe's is clearly about driving traffic. I am confident that our 100% sure brand messaging is delivering the right message to make that happen. The campaign that we're currently on now focuses on our Gulf Coast roots. It showcases our elevated food quality and unique dining experience. As a Gulf Coast based company, we have the opportunity to leverage the flavors and spices that are unique to the region.

The campaign not only plays off of that distinctiveness, it lays the foundation for our current and future menu innovation. We're also using new commercials to shift the guest perception at Joe's from the celebratory type occasion to more everyday enjoyable moments, which we believe will drive frequency over the longer term.

We rolled out a new menu in April, and that includes several of the strongest performers from the test menu that we had in our test markets, including things were like Joe's Stuffers, our Spicy Citrus Steampot, and a new golden breading process for our fried seafood. We moved to a larger size shrimp, which in test proved enhanced overall satisfaction and the value perception.

The pricing on the new menu was a modest 1% increase. We used RMS to help us with that as we always do. And thoroughly, but I'm confident these new items will prove to be successful across the system, as they were in the test markets.

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