Frisch's Reports In Line - Analyst Blog
January 16 2012 - 5:00AM
Zacks
Frisch's Restaurants
Inc. (FRS) 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.
Store Update
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.
Financial
Position
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.
Our Take
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, respectively.
One of Frisch's closest peers,
BJ’s Restaurants Inc. (BJRI)
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.
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