Some J. Alexander’s and Redlands Grill restaurants apparently didn’t have a merry Christmas.
The casual-dining chains, both operated by Nashville, Tenn.-based J. Alexander’s Holdings Inc., traditionally see strong sales between Thanksgiving and Christmas, at locations near malls and heavy retail areas.
But during the company’s fourth-quarter earnings call Thursday, executives indicated that such traffic has been slowing, at least in those retail-heavy areas, for the past three years.
“We believe online shopping is the reason for lower retail traffic,” J. Alexander’s CEO Lonnie Stout said during the earnings call. Retail foot traffic over the holidays has been declining in recent years, due at least in part from the influence of online shopping.
J. Alexander’s and Redlands are considered the same chain in the company’s financials, as many J. Alexander’s restaurants are being converted into Redlands Grill locations — combined, they currently have 31 units. The chain reported same-store sales growth of 1.4 percent in the fourth quarter ended Jan. 3.
But excluding a shift in New Year’s Eve, same-store sales actually fell 0.2 percent.
The increase in the fourth quarter was the 24th straight increase in same-store sales for the chain. Yet that steak is expected to come to an end this quarter — the company expects same-store sales for that brand to decline 3 percent to 4 percent in the first quarter.
Half of that decline is expected to come from calendar shifts. The company’s stock fell more than 6 percent on the news Thursday.
Stout defended the company’s performance on the earnings call, noting that the chain’s average weekly sales had increased from $90,000 before the recession to $115,000 last year on a string of positive same-store sales.
“It’s one of the most incredible sales runs in restaurants,” Stout said. “We’ve had five years of extremely strong performance.
“I wish I could tell you that we would never have a down quarter in the history of the company. In 25 years of doing this, every once in a while we have one.”
He also noted that some areas, particularly in trade areas with less than 150,000 people, tend to be “price sensitive markets” that periodically show some sales weakness.
“It’s not any kind of long-term problem,” Stout said. “We anticipate a quarter or two of softness, and then it will turn back positive.”
Same-store sales increased 4.7 percent at the company’s 11-unit Stoney River Steakhouse and Grill brand.
The company took over Stoney River when the brands were both owned by Fidelity National Financial Inc., which spun off J. Alexander’s Holdings last year. The company had 10 locations when J. Alexander’s took that brand over.
“Five of them were disasters,” Stout said, noting that the brand’s gross profit margin is “very low.”
Company executives believe the brand is improving. Same-store sales have risen for six straight quarters. The company recently opened a location near Memphis, Tenn., that has had stronger-than-average sales.
Stout said that Stoney River locations had focused on mostly steak, and the restaurants were typically “dark.” The new location has a light appearance, with light wood and more natural lighting, along with an upscale bar and a stronger-than-average lunch business.
“It’s responded greater than we ever anticipated,” Stout said.
Sales at the company increased 11.2 percent, to $59.3 million in the fourth quarter, from $53.3 million the previous year. Net income for the quarter increased 5.9 percent, to $2.3 million, or 16 cents per share, from $2.2 million, or 15 cents, a year ago.
Restaurant operating margin in the quarter was 17.1 percent, rising from 15.6 percent in the same period a year ago. Cost of sales declined, meanwhile, to 31.4 percent, from 32.2 percent the previous year.
J. Alexander’s wants to develop its various brands, and Stout said the company has been evaluating opportunities to add new locations. There are plans to add two J. Alexander’s this year, and one Stoney River.
“We think there are significant opportunities for new restaurant openings,” he said.
Contact Jonathan Maze at [email protected]
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