Kona Grill to extend happy hour, menu after strong 2Q

Kona Grill Inc. plans to expand its happy hour and menu initiatives, which contributed to strong profit in the second quarter, and has a restaurant remodel program on the horizon, executives said Monday.

Scottsdale, Ariz.-based Kona Grill on Monday reported that profit in its second quarter, which ended June 30, rose 126 percent to $1.8 million, or 20 cents a share, compared with $800,000, or 8 cents a share, in the prior-year period. Restaurant sales increased 2 percent to $25 million.

Berke Bakay, president and chief executive of Kona Grill, said during a conference call with analysts that the company's 2.3-percent same-store sales increase in the second quarter represents Kona Grill’s seventh consecutive quarter of positive same-store sales and the 10th consecutive quarter of positive traffic — "which we believe demonstrates the strength and momentum of our brand in multiple markets.”

Bakay said Kona Grill will continue to offer new products in its bar and sushi menus, which he said produced more than 54 percent of the chain’s sales. The company also introduced the lower-calorie “Trim” menu promotion in May and the spicier “Flare” menu earlier in July.

Bakay added that on Tuesday the company was rolling out a summer menu with such items as a chicken caprese sandwich, a soft-shell crab po’ boy and banana cream pie “while removing select lower-volume items to keep our menu fresh.”

Christi Hing, Kona’s chief financial officer, said the chain would take 1.1-percent price increase on this new menu. Currently, tickets are in the $24 to $25 range, she said.

The American grill and sushi chain also rolled out a new wine list in June with “more competitive” pricing, Bakay said, to follow on the introduction of the “Wine Down Wednesday” promotion started in April in a test program at eight restaurants, which featured bottles at half price.

“We are seeing significant increases in the average number of bottles sold in these restaurants compared to last year,” noted Bakay. Hing added that Kona’s alcohol mix remains consistent at about 30 percent to 31 percent of sales.

Kona Grill in September will begin remodeling a unit in Chandler, Ariz., that will offer a new design model for renovations of other units in 2013. Bakay forecasted renovation costs, including new materials, furniture and fixtures, in the range of $500,000 for each store. “We have several stores that maybe were opened six, seven, eight years ago that would significantly benefit from a remodel,” he said.

As for performance by region, Hing said Kona sees strength in Texas. However, its home market of Arizona has been “lagging,” she said, adding: “We've been weak in Arizona for quite some time and I think that trend still continues.” Those stores are falling behind average unit volumes of other stores, of which she said about 40 percent do around $4.5 million.

Kona Grill owns and operates 23 restaurants in 16 states.

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