Einstein Noah's sales turn positive in 3QEinstein Noah's sales turn positive in 3Q

Alan J. Liddle

Buoyed by the performance of franchised and licensed bakery-cafe locations in the third quarter, multi-brand Einstein Noah Restaurant Group Inc. reported positive systemwide same-store sales and transaction trends for the first time this year.

For the Sept. 28-ended quarter, Einstein Noah reported net income of $3.4 million, or 21 cents a share, versus a profit of $60.9 million, or $3.65 a share, in the year-ago period. That 2009 profit included a $56.5 million tax benefit, while the latest quarter result came with a $2.4 million charge for income taxes, the company said Thursday.

Revenue for the third quarter rose 1.3 percent to $101.4 million, which reflected positive same-store sales along with sales from the net five corporate and 39 franchised or licensed stores added since the end of 2009’s third quarter.

Einstein Noah said higher guest traffic in the third quarter drove systemwide same-store sales up 0.7 percent, versus a 2.7-percent decrease in 2009’s third quarter.

Same-store sales grew 3.5 percent at franchised and licensed locations in the third quarter, compared with a 1.0-percent decline in the same quarter a year ago. That growth offset a 0.2-percent decrease in same-store sales at corporate locations, which nevertheless represented an improvement from a 3.1-percent decline in the year-ago third quarter and a 2.2-percent drop from the second quarter of this year.

Noting that the third quarter marked the first time this year that systemwide same-store sales and transactions were positive, Einstein Noah chief executive Jeff O’Neill credited “the successful launch of our new lineup of bagel thin sandwiches.”

The company said its third-quarter gross profit improved by 120 basis points, to 19.8 percent of sales, compared with the prior year, on higher sales and a 0.6-percent reduction in cost of sales at company restaurants. O’Neill said the improvement in cost of sales reflected “ongoing initiatives at the store-level, within our supply chain, and in our manufacturing operations.”

At the end of the quarter, the Lakewood, Colo.-based company operated 352 Einstein Bros. Bagels stores, 76 Noah’s New York Bagels and one Manhattan Bagel bakery-cafe restaurants, and franchised 13 Einstein Bros. stores and 72 Manhattan Bagel Co. locations, as well as licensed 200 Einstein Bros. sites. The latest quarter’s total of 428 corporate stores and 286 franchised or licensed locations compared with 423 corporate and 247 franchised or licensed sites open at the end of 2009’s third quarter.

Einstein Noah has embarked on a “franchise-first growth model” designed to create an “asset-light” business to “maximize value for our shareholders,” management has said. Along those lines, at the end of the third quarter, its base of licensed and franchised units was 15.4 percent larger than it had been at the end of the third quarter of 2009, while its company restaurant base had grown by 1.2 percent.

O’Neill said that the 700-unit mark surpassed by the company’s systems in the third quarter underscored Einstein Noah’s “mission to be the fastest growing, fast-casual restaurant chain in North America.”

Contact Alan J. Liddle at [email protected].