BJ's warns on 4Q sales, traffic declines

BJ’s Restaurants Inc. blamed discounting and increased promotional activity for an expected 2.7-percent decline in same-store sales during the fourth quarter in preliminary results released last week.

For the quarter ended Dec. 31, BJ’s reported revenue of about $199.8 million, an 8-percent increase from $184.8 million a year ago.

The 2.7-percent same-store sales decline, however, included a 2.3-percent drop in traffic combined with a decrease in average check of about 0.4 percent.

Based on the preliminary results, the company said net income per share for the quarter is expected to be between 5 cents to 7 cents per share. The company will release full results for the quarter and its fiscal year on Feb. 19.

Greg Trojan, BJ’s president and chief executive, said sales during the holiday season were disappointing.

“While BJ’s sales were within our expectations during the first part of the quarter, we experienced a significant softening in comparable-restaurant sales beginning in the middle of November and continuing through the end of the year,” he said in a statement.

In addition, bad winter weather in December impacted same-store sales in Texas and the Ohio Valley.

The softer sales and increased spending on marketing to attempt to drive traffic will cut into margins, Trojan warned. Still, BJ’s will likely outperform traffic trends demonstrated by the chain’s casual-dining peers, he predicted.

This year, the company plans to introduce some new investments designed to “drive a profitable future,” Trojan said. In March, for example, the company will launch new brand messaging, including a new menu format and the introduction of 15 new “craveable” menu items.

Last year, the company began a kitchen efficiency initiative called “Project Q,” focusing on eliminating unnecessary kitchen complexity, which Trojan said would improve performance.

In fiscal 2014, BJ’s plans to open 15 new restaurants, a decrease from 17 last year, which included one relocation. The new crop for 2014 will include nine units with the smaller 7,300-square-foot prototype, which costs about $1 million less to build than BJ’s 8,500-square-foot bigger box units.

“Our new restaurant design, which we expect to be equally as attractive and productive as our current format, is intended to enhance shareholder returns by reducing forward capital expenditures, which we believe will improve our overall return on invested capital,” Trojan said.

In reports on Friday, Wall Street analysts expressed caution that BJ’s could regain its once-premium stock valuation. The company’s stock closed at $29 per share on Friday, falling nearly 5 percent for the day as a result of the preliminary report and near the low end of the 52-week range of $25.50 to $40.99.

Christopher O’Cull of KeyBanc Capital Markets, wrote that he expects traffic declines to continue at BJ’s.

“We are not confident that the issues causing BJ’s declining guests counts are well understood or that the company’s sales-building plans will result in sustainable improvements,” he said.

“While we remain optimistic that BJ’s can continue to grow from just 146 locations today, the stock’s premium valuation and the company’s lack of traction in regaining sales momentum leave us cautious on the name,” wrote Sharon Zackfia of William Blair & Company LLC.

BJ’s ended the year with 146 restaurants under the BJ’s Restaurant & Brewery; BJ’s Restaurant & Brewhouse; BJ’s Pizza & Grill; and BJ’s Grill brand names. Trojan projects that the chain could potentially reach 425 locations across the U.S.

Contact Lisa Jennings at [email protected].
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