McCormick & Schmick’s Seafood Restaurants Inc. downgraded its outlook for the year on Thursday, citing the slow pace of recovery and the closure of two locations.
For its second quarter ended June 29, Portland, Ore.-based McCormick & Schmick’s reported a net loss of $3 million, or a loss of 20 cents per share, compared with a profit of $1.3 million, or 9 cents per share, for the same quarter a year ago. The loss included impairment, restructuring and other charges related to the unsolicited tender offer by Tilman Fertitta of Landry’s Restaurants Inc., as well as the company’s putting itself up for sale and evaluation of strategic alternatives.
Fertitta pulled his tender offer in July, but said he would participate in the sale process.
Revenue for the second quarter declined 1.1 percent to $88.7 million, with same-store sales down 2.7 percent.
For the year, McCormick & Schmick’s projects revenue between $340 million and $350 million, down from the $345 million to $355 million projected previously, though the guidance does not consider the impact of the unsolicited tender offer from Landry’s. Earnings are expected to be between 26 cents and 31 cents. Earlier estimates were between 31 cents and 36 cents
However, Bill Freeman, chief executive of the seafood chain, said remodeled locations, four of eight of which have been completed, are showing better-than-expected returns, and revitalization efforts are taking hold.
“Although we are discouraged by the pace of recovery in a portion of our portfolio, we are encouraged by the positive results we are seeing in both sales trends and guest satisfaction scores as a result of our integrated strategic revitalization program,” Freeman said in a statement. “Specifically, our newly remodeled properties are generating comparable sales trends that exceed both their regional counterparts and the company as a whole, and they are on track to deliver ROIs above our 20 percent hurdle rate.”
The company said it has added another location to remodel this year after successfully renegotiating a new lease at an existing premier location that was set to terminate this year.
Without specifying the location, officials said the restaurant will close for a “significant rebuild” to better match guest preferences in that market. Because permitting and approvals were obtained earlier than expected, the project is expected to be completed in 2011.
For all the remodels, the temporary closure of impacted locations is estimated at between 25 and 30 weeks in 2011, the company said.
Other locations were closed permanently. The chain’s M&S Grill in Minneapolis was “strategically closed,” and officials decided not to renew the lease at the McCormick & Schmick’s Seafood Restaurant location in Bethesda, Md.
Freeman said the company will continue to work on improving the guest experience.
“We remain committed to the long-term revitalization of our business,” he said. “By delivering value to our guests, investing in service and hospitality initiatives, and remodeling our facilities, all of which will have an ongoing positive impact on our guest experience, we believe we will continue to provide long-term value to our stockholders.”
The company operates 85 seafood restaurants in the U.S., as well as seven restaurants under The Boathouse brand in Canada. It is also considering an expansion of The Boathouse chain in Canada, as well as possibly bringing it to the U.S. as a secondary brand.
Contact Lisa Jennings at [email protected].
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