Cosi Inc. (COSI), a premium casual dining restaurant chain, reported a loss of 5 cents per share in the fourth quarter of 2010 compared with the loss of 11 cents delivered in the prior-year quarter. The loss narrowed down due to positive comparable store sales growth and shrink in operating loss. In fiscal 2010, loss per share was 6 cents versus a loss of 27 cents a share in fiscal 2009.
Total revenue, which comprises company-operated restaurant sales and franchise fees and royalties, plunged 10.2% year over year to $25.4 million in the quarter. Company-operated restaurant sales tumbled 11.1% to $24.6 million due to the sale of 13 company-owned restaurants to a franchisee in the second quarter of 2010. However, franchise fees and royalty revenues increased 36.4% year over year to $0.7 million. In fiscal 2010, total revenue fell 7.5% year over year to $109.7 million.
System-wide comparable store sales, for the third consecutive quarter, increased 4.5% from the year-ago quarter, despite lower consumer discretionary spending. The company-owned comparable restaurant sales grew 6.1%, driven by a 3.8% rise in traffic and 2.3% increase in average guest check.
The same-store sales at franchise-operated restaurants inched up 1.8%. Further, Cosi is benefiting from its marketing strategy of expanding its customer base and driving traffic by providing catering services for breakfast as well lunch day parts.
In fiscal 2010, system-wide comparable store sales spiked 2.4% on the back of a 2.6% rise in company-owned same-store sales and 2.0% growth in franchise-operated restaurants.
Based in Deerfield, Illinois, the company’s restaurant operating loss narrowed down to $2.9 million from $4.4 million. This improvement was aided by a 30 basis points (bps) contraction in cost of food and beverage, 80 bps decline in labor and related benefits and a 10 bps dip in occupancy and other restaurant operating expenses, as a percentage of sales.
Financial Position
Cosi ended the quarter with cash and cash equivalents of $10.3 million and shareholder’s equity of $11.7 million.
Our Take
We expect estimates to go up in the coming days as the company lowered its loss and is efficiently containing costs in an inflationary environment. Moreover, comparable same-store sales are improving as the company is able to drive traffic, thus reflecting its ability to utilize the improving economic condition.
Cosi currently operates 142 restaurants, of which 83 are company-owned and 59 are franchised locations. The company operates in 18 states including the District of Columbia in the U.S. and also operates in the United Arab Emirates. Its prime competitors include Panera Bread Co. (PNRA) and Starbucks Corp. (SBUX).
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