Ignite's stock tumbles, but Macaroni Grill not to blameIgnite's stock tumbles, but Macaroni Grill not to blame

Jonathan Maze

The price for shares of stock in Ignite Restaurant Group has plunged nearly 30 percent over the past three days — and it has nothing to do with its recent sale of Macaroni Grill.

Ignite announced the sale of Mac Grill for $8 million one week ago. That was one-seventh of the $54 million that Ignite paid for the chain. And yet in the following two days its stock was up nearly 7 percent. Analysts largely applauded the move.

At the time of the announcement, company executives suggested the move was needed so Ignite could focus on its flagship Joe’s Crab Shack. And then on Thursday after market close, we found out why.

Joe’s same-store sales fell 4.9 percent in the 2014 fiscal year — a decline greater than the 4.5 percent at Mac Grill. The brand’s operating income, meanwhile, was cut in half, from $45.6 million in 2013 to $21.5 million in 2014. The decline in operating income was due to a combination of higher food costs and lower sales.

Investors have punished the chain since then, shaving nearly a third off of its value. By comparison, the Nation’s Restaurant News Restaurant Index has been up slightly. So are the broader stock indexes.

The decline continued Ignite’s struggles as a public company. Ignite generated some enthusiasm following its 2012 IPO, with its stock price peaking at $20.09 in 2013.

But since then, its stock has been in freefall, losing nearly three-quarters of its share price, even as the NRN Restaurant Index was up nearly 16 percent.

Some of that decline was based on the incredible weakness of Mac Grill, which had an operating loss of $17 million last year. But the weakness at Joe’s has given investors indigestion. Last week’s report only increased their concern over the brand.

Analysts now seem less certain how long a turnaround at Joe’s will take. Chris O’Cull, analyst at KeyBanc Capital Markets, suggested in a recent note that the market’s reaction is an indication investors fear that the recovery will take more time than expected.

Even those who think Joe’s turnaround will come are uncertain. “We are optimistic that a more focused approach will yield meaningful benefits over time,” wrote Baird Equity Research Analyst David Tarantino, “although we fear that planned initiatives will take time to gain traction given the negative operating momentum for Joe’s.”