J. Alexander’s Holdings Inc. said Tuesday that same-store sales fell 3 percent at its flagship J. Alexander’s chain in the first quarter ended April 3.
Company president and CEO Lonnie Stout had a simple explanation for the results: The economy.
“I think the economy stunk in many markets,” Stout said during the company’s earnings call Wednesday.
He then referred to the federal government’s recent report that GDP increased a meager 0.5 percent in the first quarter.
“If GDP was up a half a point in the first quarter, there were a lot of markets with a negative GDP,” Stout said.
Revenue in the quarter increased 1.2 percent, to $56.9 million, from $56.2 million in the same period a year ago.
Net income, however, was cut in half, to $2.3 million, or 15 cents per share, from $4.8 million, or 32 cents per share, in the same period a year ago. Restaurant operating margin also fell, to 15.2 percent of sales, from 16.8 percent a year ago.
J. Alexander’s is based in Nashville, Tenn., and operates 42 restaurants in 14 states, 11 of which are Stoney River Steakhouse & Grill restaurants, which reported an increase in same-store sales of 0.7 percent in the first quarter. The other restaurants are J. Alexander’s, some of which are being converted to Redlands Grill units.
The company’s stock fell more than 2 percent by early Wednesday afternoon.
Much of the decline in same-store sales at J. Alexander’s was due to lower guest counts, which declined 1.5 percent in the quarter. Average check also decreased 1.5 percent.
Stout said that average weekly sales at the chain were $92,000 in 2010. By the first quarter of 2015, that had grown to $118,600, or a compound growth rate of 5.2 percent over five years. That fell to $115,000 in the first quarter this year.
Stout said that 16 percent of J. Alexander’s customers make 66 percent of visits, and those users are still present.
The weakness was typically among price sensitive, older consumers and “aspirational customers,” he said, and that softness was typically in the late lunch or early dinner periods.
“The last time we saw weakness in these dayparts was the recession,” he said.
Stout said that most of the chain’s large markets, except for Houston, have been performing fine. So densely populated markets like Chicago, Detroit, Atlanta and South Florida have done well.
Rather, he said, the softness has been in smaller markets, including everywhere in Ohio, North Florida, Alabama and some locations in Tennessee.
“We do not believe our operations are responsible for any sales issues,” Stout said.
To address the sales concerns, the company started to offer $12 and under items at lunchtime and dinners under $20. He said the promotions have had a positive impact on the company, although he expects sales issues to impact average check.
Stout isn’t worried about a particular operator, but he noted that competition in some markets has intensified.
“In the last two years, more full-service, upscale restaurants have opened in Nashville than in the last 10 years,” he said. “We’re seeing restaurant development in the $30-plus check average arena everywhere. Some of our core guests are trying those places.”
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