NEW YORK —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
Corporate cost controls, slowed unit development and shifts to lower-cost menu items, such as mini sandwiches or smaller plates, helped such casual-dining companies as Brinker International, The Cheesecake Factory and BJ’s Restaurants report stronger earnings, despite still-negative sales trends. As the largest segment of the restaurant industry, and the hardest hit for the past few years, the positive news helped lift the entire restaurant sector. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
“The first week of the peak restaurant industry earnings season was a powerfully positive event,” analyst Joe Buckley at Bank of America-Merrill Lynch said in a research note. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
The NRN Restaurant Stock Index rose 1.35 percent for the week ended April 24, beating small weekly dips for the Dow Jones Index and the S&P 500 Index. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
The reversal of fortunes for restaurant stocks—with casual-dining companies garnering the most momentum and quick-service chains stumbling—may continue as some sources speculate that growing consumer confidence may end the “trade down” effect that has hurt casual diners and benefitted quick-service chains. As the U.S. recession reached its peak, which some say occurred late last year, consumers were spending less on dining out in general, but cutting back mostly on higher-priced fare and sit-down restaurants. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
U.S. consumer confidence rose in April to the highest level since September, according to the Reuters/University of Michigan’s preliminary monthly consumer sentiment index. The first consumer confidence reading for April increased to 61.9, from a 57.3 reading in March, the survey said. The reading reached a 28-year low of 55.3 in November 2008. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
In addition to a possible uptick in consumer spending, which would benefit casual-dining chains, the once recession-resistant fast-food sector also is battling sales and profit erosion caused by weakness in overseas business and a stronger U.S. dollar. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
“For the first time in a long time, there is more confidence about casual-dining earnings and more worries about quick-service restaurant earnings as we approach release dates,” Buckley said. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
For the week ended April 24, top stock price gainers in the NRN Restaurant Stock Index included upscale operators Ruth’s Hospitality Inc. and Morton’s Restaurant Group, and dinnerhouse operators Famous Dave’s of America Inc. and DineEquity Inc., parent of the Applebee’s chain. Meanwhile, stock price losers included such quick-service companies as Wendy’s/Arby’s Group Inc., AFC Enterprises Inc., McDonald’s Corp. and Sonic Corp. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
The Cheesecake Factory Inc., the operator of about 145 restaurants, was last month’s poster child for improvement in the casual-dining segment. While its earnings and sales slipped year-over-year, the company’s first-quarter results were well above average Wall Street expectations. In addition, an improvement in same-store sales—although still negative—led to better-than-expected results. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
Chairman and chief executive David Overton said in a conference call that first-quarter guest traffic and check averages improved sequentially from fourth-quarter levels. While guests continued to cut back, mostly by ordering fewer alcoholic and nonalcoholic beverages, the chain’s dessert orders were up year-over-year, which has helped increase the chain’s average check, he said. In addition, the chain began to introduce its newest menu, Small Plates & Snacks, which further boosted the average check. The check was driven higher, the company said, because guests are ordering from this menu as add-ons to a standard meal, either for use as an appetizer or shared plates. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
“One of the advantages … is the higher check average that [the Small Plates & Snacks menu] currently is commanding,” said chief financial officer Doug Benn. “They’re also driving our cost of sales lower, so that’s what’s so exciting about this menu category for us.” Other chains that are looking at lower-cost, smaller menu items include Chili’s and T.G.I. Friday’s. Same-store sales at Cheesecake fell 3.4 percent from a year ago. In the fourth quarter, same-store sales had fallen 7.1 percent. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
Still, for the Calabasas Hills, Calif.-based Cheesecake and other casual-dining companies, cost control and slowed unit development were the main drivers behind improved results. Just one new Cheesecake Factory location was opened in the first quarter and only one additional location will open during the remainder of the year, helping to reduce pre-opening costs. Cost-of-sales figures also were helped by more favorable commodity costs, the company said. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
For the quarter ended March 31, Cheesecake earned $10 million, or 17 cents per share, compared with earnings of $14.3 million, or 21 cents per share, during the same quarter last year. Revenue fell to $392.8 million from $393.8 million last year. According to reports, analysts on average had expected the company to earn 10 cents per share on revenues of $382.3 million. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
In the quick-service sector, results at Yum! Brands Inc. reflected what some observers fear is a slowdown in U.S. sales for quick-service chains, as well as the negative effects that larger, multinational companies will face from a stronger U.S. dollar. The Louisville, Ky.-based company reported a 14-percent drop in first-quarter profit on weak domestic sales, especially at Pizza Hut and KFC, as well as harsh effects from foreign exchange rates. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
Company officials said last month that they expected currency exchange rates would continue to hurt reported revenue and profit in the second quarter, compounding the impact of still weakened consumer spending. U.S. same-store sales for the first quarter ended March 31 fell 2 percent. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
“We forecast the [current] second quarter will likely be Yum’s most challenging quarter and the low point of our year,” said David Novak, chairman and chief executive of Yum. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
The franchisor has said in the past that the second half of 2009 will be better for Yum, which is parent to Pizza Hut, KFC, Taco Bell and other quick-service chains. Products such as KFC’s grilled chicken as well as new marketing for Pizza Hut and Taco Bell are expected to gain more traction as the year progresses. In addition, commodity cost deflation is expected in the second half of the year, following a difficult 2008 that saw skyrocketing food costs. The company also has implemented cost-cutting initiatives and a refranchising program. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
Still, the current year did not start well for Yum, a multinational company that gets nearly half of its revenue and operating profit from operations overseas. Because of the stronger U.S. dollar, which leads to less money earned overseas once converted to U.S. currency, operating profit in the company’s international division alone was hurt by $21 million, or 15 percentage points. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
First-quarter consolidated net income totaled $218 million, or 46 cents per share, compared with $254 million, or 50 cents per share, in the same quarter a year earlier. Excluding special items, Yum said it would have earned 48 cents per share in the latest quarter, versus 42 cents per share a year ago. Items included a $100 million gain last year from the sale of its minority interest in KFC Japan and current-year gains and losses from U.S. restructuring initiatives, including the refranchising plans. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
First-quarter consolidated revenue fell 8 percent to $2.22 billion. —First-quarter earnings season started with a bang, as better-than-expected results from casual-dining companies helped offset weaker quick-service performance and spark optimism about the restaurant industry’s overall prospects.
