BJ's warns on volatile consumer spending

BJ’s Restaurants Inc. said on Thursday that same-store sales for its fourth quarter climbed 3 percent, but restaurant sales remained “volatile and choppy,” according to a preliminary report.

For the quarter ended Jan. 1, the company said unaudited results showed revenues rose 7.5 percent to $184.8 million for the 13-week period, compared with $171.8 million for the 14-week quarter a year ago. Full financial results for the year are scheduled for release in mid-February.

Jerry Deitchle, BJ’s chair and chief executive, said the company was pleased with top-line results in light of the challenging economic climate.

“Our sales comparisons were quite choppy during the quarter, especially during the first three weeks of the holiday season,” he said in a statement. “As expected, the uneven and less-predictable sales volumes made it more challenging for our restaurant operators to optimize their bottom-line results.

“Having said that,” he added, “there is little to no opportunity to optimize performance without the sales, and at BJ’s we continue to be sales builders first and foremost.”

The 3-percent same-store sales increase hurdled a 5.1-percent increase the prior year, comparing 13-week periods, and Deitchle noted that the recent quarter was the 12th consecutive period of positive comparisons.

After a disappointing third quarter, several Wall Street analysts shifted their stance on BJ’s from “buy” to “hold,” a position they reiterated after the preliminary view into fourth-quarter results.

In a report Thursday, analyst Sharon Zackfia of William Blair & Co. estimated that BJ’s traffic was flat for the quarter, a modest improvement over the third quarter’s 1-percent decline in traffic.

The results met expectations, but she downgraded her earnings estimate for the quarter by one penny to 26 cents per share based on contracting margins. She also lowered her earnings projection for 2013 by 5 cents to $1.28 per share, which she notes is well below the consensus estimate of  $1.35.

“While we continue to believe the opportunity remains to grow BJ’s into a much larger company from 130 locations, we view the stock as fairly valued at 28 times our 2013 estimate, particularly as we believe estimates remain too aggressive absent evidence of BJ’s ability to stabilize restaurant margins at a lower comp cadence of 2 percent to 3 percent versus its historical mid-single-digit comp bandwidth,” she wrote.

Christopher O’Cull, an analyst with Key Banc Capital Markets — who maintained his fourth-quarter earnings estimate of 28 cents per share and a projected 2013 estimate of $1.40 — wrote that he would be looking for management to address whether the company will be able to leverage at least 2.5-percent higher menu prices in 2013. He added that he also expects an update on commodity inflation estimates, as the company makes investor presentations next week.

On Feb. 1, Deitchle is scheduled to step down as chief executive, though he will remain chair. Stepping into the CEO role is Greg Trojan, who was appointed president in December.

Deitchle said Trojan’s “on-boarding process” has been smooth and productive. “We have solid confidence in Greg’s ability to continue leading BJ’s expansion as a national restaurant company and consumer brand,” he said.

During the fourth quarter, BJ’s opened five restaurants for a total of 16 new locations in fiscal 2012, including one that was relocated. This year, the Huntington Beach, Calif.-based company plans to open as many as 17, including the relocation and conversion of a smaller, legacy-format BJ’s Pizza & Grill unit to the larger-format restaurant.

BJ’s currently owns and operates 130 units in 15 states, and Deitchle estimates there is room for at least 425 of the large-format casual-dining restaurants nationally.

Contact Lisa Jennings at [email protected].
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