An aggressive effort to cut costs and improve sales helped Così Inc. narrow its loss and generate positive, restaurant level cash flow in the first quarter, the company said this week.
Così reported a net loss in the quarter of $3.5 million in the quarter, or 8 cents per share, compared with a loss of $4.3 million, or 12 cents per share, in the same period a year ago. That continues the bakery-café chain’s streak of net losses — it has yet to post a profit in its history as a public company.
Yet executives on the company’s earnings call late Thursday said that they remain on track to generate positive cash flow this year by the third quarter — the company’s current, primary goal.
“Our 2016 plan is on course,” CEO R.J. Dourney said on the call. “We’re pleased at the team’s impact on profitability at the unit level.”
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Same-store sales in the quarter ended March 28 increased 2.2 percent, including 1.5 percent at company locations and 3.7 percent at franchise units.
The company said that restaurant level cash flow was slightly positive in the first quarter, which ended March 28. By comparison, restaurant level cash flow was negative $1.4 million. That’s an 840 basis point improvement.
“Obviously, we’re not living in an ideal situation,” CFO Miguel Rossy-Donovan said. “We’re living in the reality of a turnaround. We’re managing through the low point of our cash flow. Our cash balances are not ideally where they should be. But we’re not distracted by it. We’re more focused.”
Investors were not overly impressed, however, either by the cash flow or the same-store sales results. The company’s stock price fell by more than 10 percent Friday.
The company said that food and beverage costs fell 160 basis points to 26.6 percent of sales, from 28.2 percent of sales. Company executives credited operational improvements and cost stability for certain commodities.
Executives also noted that labor costs as a percent of sales fell 350 basis points to 37.7 percent from 41.2 percent. The company said the decrease was due to efforts to improve scheduling of hourly workers and managers and improve productivity.
But the company also closed three locations in the first quarter and now has 107 locations.
It plans to close another two underperforming locations in the coming weeks, and then four more determined to be struggling too badly to continue operating. But the nine total locations designated for closure is actually smaller than the 14 locations the company initially targeted for closure.
“Doing a full-court press against an underperforming unit or market, rather than simply shuttering it, is so valuable for Così,” Dourney said. He noted that the company did that for its New York City market, which has since turned around.
Contact Jonathan Maze at [email protected]
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