After recording slow sales in the second quarter, California Pizza Kitchen Inc. pointed to promising signs in the current quarter, including positive sales in a third of the states where it has restaurants.
Executives from the company spoke to investors Thursday after reporting a 31-percent drop in profit for the July 4-ended second quarter. CPK blamed the results on the shift of its "Thank You Card" promotion, which took place in last year's second quarter but not in this year's. Click here for the company's latest results.
Co-chief executive Rick Rosenfield said the promotion was far more effective than they had anticipated and so had limited their “visibility” of how the second quarter would be affected.
CPK brought the promotion back in the third quarter, and officials said same-store sales are down just 0.9 percent, after falling 5.9 percent in the second quarter.
Rosenfield highlighted several sales-driving initiatives, including the introduction of a delivery call center, an expanded wine list, a new catering program and a “Small Cravings” menu, which he said were “generating excellent results.” He added that the chain was currently getting record-high guest satisfaction scores.
Other highlights from the call:
Changes to retail food products
Sue Collyns, CPK’s chief operating officer and chief financial officer, said changes to the company's licensed frozen foods had resulted in a 15-percent year-to-date drop in royalties from those items.
Rosenfield said the company was discontinuing its self-rising-crust 9-inch frozen pizza because of cannibalization from its segment-leading thin-crust pizza, which was introduced five years ago.
The company also was discontinuing its 12-inch rising crust pizza and flatbread melts, which will be replaced by “The Original Restaurant-Style Crust Pizza” available in barbecue chicken, Hawaiian, and five-cheese-and-tomato flavors.
The company also is extending its pizza-for-one line of frozen products with the addition of a Hawaiian pizza.
State-by-state sales
CPK said it is now seeing positive same-store sales in 14 states, compared with just three states in the second quarter.
Breaking down the chain's sales performance by state, Rosenfield said Florida, Illinois and Texas, where CPK has a large presence, had all returned to positive same-store sales in the third quarter, as had the East Coast states, where 51 CPK restaurants operate, and Hawaii, which has four units.
The big weak performer continues to be California, although performance was improving there, Collyns said.
Impact of menu changes
Collyns said CPK was seeing improved wine sales since expanding the list to more than 30 selections. She said adult beverages now accounted for about 7.1 percent of the sales mix.
Check averages also were up by 20 percent, she said, driven in part by the new “Small Cravings” items, which boosted incremental sales.
CPK debuted the “Small Cravings” menu in February. The items on the menu are smaller portions than the chain's appetizers and include an asparagus and arugula salad, chips and guacamole, and sweet corn tamale ravioli, among others.
Delivery sales
Delivery sales increased by about 15 percent in the second quarter and were up by 20 percent so far in the 3rd quarter, CPK said.
Rosenfield said that before the recession, takeout sales accounted for about 14 percent of sales and delivery accounted for another 4 percent.
Delivery, which mostly went to corporate accounts, was the channel hardest hit by the recession, particularly in California, he said, adding that delivery sales at this time last year were down by more than 30 percent in that state.
Collyns said that the company was in the process of promoting delivery sales by buying more bicycles and “doing grass roots things.” She added that customers were responding well to the new catering menu.
Contact Bret Thorn at [email protected].
