NASHVILLE Tenn. O’Charley’s Inc., operator or franchisor of 365 restaurants under three brand names, said on Thursday its fourth-quarter and full-year profits were slashed from a year ago by impairment and other charges as well as weak sales.
The company was able to eke out a net profit of $727,000, or 3 cents per share, for the quarter ended Dec. 30, on revenues of $215.2 million. In the year-earlier fourth quarter, O’Charley’s posted net income of $5.2 million, or 22 cents per share, on revenues of $240.4 million.
For the year, the company posted earnings of $7.2 million, or 31 cents per share, versus year-earlier results of $18.9 million, or 80 cents per share. Revenues for fiscal 2007 totaled $977.8 million, down from fiscal 2006 revenues of $989.5 million.
For the latest full year, O’Charley’s booked charges and expenses of $24.2 million, of which $4.7 million was booked in the fourth quarter, surrounding the sale of the company’s commissary, restaurant impairment charges, severance charges from management changes, and charges from its re-branding initiatives. O’Charley’s, which operates or franchises 229 namesake units, 115 Ninety Nine Restaurant locations and 10 Stoney River Legendary Steaks, worked through 2007 to rebrand its menus, concepts and restaurant buildings in order to increase guest traffic and sales.
The company’s latest-year results were also affected by an extra 53rd week of operation in the year-ago fiscal 2006, the company added. Still, that extra week a year ago did not account for the company’s year-to-year revenue shortfall. Latest-quarter same-store sales fell 4.3 percent at O’Charley’s corporate units, 4.5 percent at Stoney River, and 2.6 percent at the Ninety Nine, the company reported. The company estimated that severe weather and a fiscal calendar shift for New Year’s Eve unfavorably affected same-store sales in the fourth quarter by 0.5 percent at O’Charley’s, 2.6 percent at Stoney River and 1.3 percent at Ninety Nine.
Gregory L. Burns, chairman and chief executive, said the current economic conditions and their impact on consumer spending have made it a challenging year for all restaurant companies. He said O’Charley’s, which has been under pressure from an active shareholder, has taken steps to enhance shareholder value, including the sale of the commissary, the outsourcing of manufacturing and distribution divisions and the buyback of 8 percent of shares outstanding. O’Charley’s also implemented its first quarterly dividend.
Also on Thursday, the company’s board of directors approved a $20 million increase to the company’s share repurchase authorization. Last year, it approved a $50 million repurchase authorization. As of Feb. 7, O’Charley’s has repurchased $30 million of its common stock. The increased authorization allows for an additional $40 million repurchase of its common stock.
O’Charley’s said it expected more of the same for the current year. The company expects flat to declining annual same-store sales. On an earnings basis, the company expects annual earnings per share of between 30 cents and 40 cents, including anticipated charges of between 45 cents and 50 cents per share related to the re-branding of approximately 110 restaurants, and the rollout of kitchen display systems to more than 200 restaurants.
O’Charley’s said it plans to open between three and five new O’Charley’s corporate restaurants, between two and four new Ninety Nine restaurants, and one or two new Stoney River restaurants. It expects to spend between $65 million and $75 million for capital investments during the year.
