Third-quarter earnings results continued to reflect both bottom-line improvements driven by cost cutting and stalled sales as consumers continue to clutch their dollars.
Wendy’s and Arby’s followed quick-service players McDonald’s and Burger King into the realms of reduced sales growth, which each operation said it plans to combat with more value items. Arby’s, for example, is expanding its test of a $1 value menu and will continue to promote its $5.01 combo meals.
Higher-end concepts, such as Morton’s and McCormick & Schmick’s, continue to feel the pressure of smaller business expense accounts, which have typically driven business lunch and private-party revenue. Both of those brands reported double-digit declines in same-store sales.
Executive after executive cited the punishing economic environment, which became even bleaker with news that the domestic unemployment rate hit 10.2 percent in October.
Still, some companies, such as Papa John’s International Inc. and Starbucks Corp., provided a silver lining to restaurant industry results by increasing their annual earnings guidance on better-than-expected results. Additional bright spots for the industry included reduced food costs, and some operators said that October sales trends have improved slightly, prompting observers to again ask whether the industry has hit bottom and is ready to rebound.
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A selection of third-quarter financial results:
Wendy’s/Arby’s Group Inc. posted third-quarter net income of $14.7 million, or 3 cents a share, on revenue of $903.2 million. The company’s results included pretax charges totaling $20.6 million related to last September’s merger of Arby’s parent Triarc Cos. Inc. and Wendy’s International Inc. as well as impairment expenses. Wendy’s North American same-store sales fell 0.1 percent in the quarter, which the company attributed to 300 fewer restaurants serving breakfast, which the chain has shelved as it re-evaluates menu offerings. Sales trends were considerably worse at sister chain Arby’s, where North American same-store sales fell 9 percent. The company said it would look to drive sales at Arby’s by promoting value offerings, including expansion of the chain’s $1 menu to additional markets. It will also continue marketing its $5.01 meal deals.
Starbucks Corp.’s turnaround appears to be taking hold, as fourth-quarter profit rose on costs savings and improved sales. Fourth-quarter net income totaled $150 million, or 20 cents a share, up from profit of $5.4 million, or 1 cent a share, in the year-earlier quarter. Revenue fell 3.7 percent to $2.4 billion, which the company blamed on currency conversions and fewer stores in operation. Fourth-quarter same-store sales fell 1 percent, which compares with a 5-percent drop in the fourth quarter of last year. Starbucks earned $390.8 million, or 52 cents a share, for fiscal 2009, compared with earnings of $315.5 million, or 43 cents a share, last year. Full-year revenue fell 6 percent to $9.8 billion. Same-store sales for the year decreased 6 percent. The parent of 16,635 coffeehouses worldwide said it had achieved full-year cost savings of about $580 million, which it said exceeded goals by about $30 million.
California Pizza Kitchen Inc. cited operating efficiencies for a 16.8-percent jump in third-quarter profit. Its sales continued to fall, however. Net income for the quarter totaled $5.8 million, or 24 cents per share, compared with $5 million, or 20 cents per share, a year ago. Latest-quarter revenue fell 5.3 percent to $164.8 million. Same-store sales at the company’s full-service restaurants dropped 8 percent. The company said it is planning several traffic-building initiatives in the current fourth quarter, including a recently announced wine menu revamp, as well as new menu items, a sales productivity report, a takeout call center and expanded catering.
Morton’s Restaurant Group reported that revenues in the third quarter fell 12.2 percent to $64.1 million. Same-store sales dropped 16.8 percent. The company’s net loss of $3.3 million, or 21 cents per share, compared with a net loss of $63.7 million, or $4.02 per share. The year-ago quarter included an impairment charge of $66.2 million.
Papa John’s International Inc. raised its 2009 earnings outlook after booking third-quarter profit of $11.7 million, or 42 cents per share. That compares with net income of $7.7 million, or 28 cents per share, in the same quarter a year ago. Latest-quarter revenue totaled $263.9 million, a decrease of 5.7 percent from a year earlier. Papa John’s domestic systemwide same-store sales remained flat, reflecting a 0.6-percent decline at corporate units and a 0.2-percent increase at franchised locations. It said positive traffic trends continued in October, the first month of the current fourth quarter.
Einstein Noah Restaurant Group Inc. reported third-quarter net income of $60.9 million, or $3.65 per share, versus $4.5 million, or 28 cents per share, in the same quarter a year ago. The company said that net income improvement was tied to a deferred tax benefit of $56.8 million, among other factors. Revenues decreased 0.9 percent to about $100.0 million. Same-store sales fell 3.1 percent at company-operated restaurants and dipped 2.7 percent systemwide.
McCormick & Schmick’s Seafood Restaurants Inc. reported a 3.6-percent drop in net income to about $1.3 million, or 9 cents per share, for its third quarter, which is roughly flat to the earnings per share for the same quarter in 2008. Revenue decreased 13.6 percent to $86.3 million. It reported an 18.8-percent decrease in same-store sales, resulting from a 14.2-percent fall-off in guest traffic coupled with a 4.6-percent dip in net pricing and product mix.
