Nashville-based O’Charley’s Inc. (CHUX) reported disappointing fourth quarter and fiscal 2010 results. The results were hurt by higher commodity and operating costs resulting in lower margins and impairment charges.
The company reported a quarterly loss of 77 cents per share, wider than the Zacks Consensus Estimate of a loss of 30 cents and 56 cents delivered in the prior-year quarter.
O’Charley’s said that total revenue in the fourth quarter tumbled 1.4% year over year to $183.5 million. Management now expects total revenue for the first quarter in the range of $260 million to $266 million.
The company’s full-year loss per share was $1.29 versus 15 cents in full fiscal 2009. Revenues were $830.1 million in full fiscal 2010, representing a year-over-year drop of 4.2%.
Inside the Headline Numbers
O’Charley’s, operating under its namesake along with Ninety Nine Restaurant and Stoney River Legendary Steaks, reported general and administrative expenses of $10.1 million during the quarter, up 14.8% year over year. The restaurant level margin declined 200 basis points to 11.1%.
Casual dining chain O’Charley’s indicated that adjusted EBITDA in the quarter was $5.4 million compared with $10.5 million in the year-ago quarter. The company now expects EBITDA for the first quarter of 2011 in the range of $16 million to $19 million.
Net loss from operations came in at $16.4 million, compared with $11.8 million in the prior-year quarter. The company expects first quarter 2011 income from operations in the range of $3 million to $6 million.
Same-store sales at the company’s O’Charley’s restaurants fell 1.4% year over year. A rise in average check of 0.8%, partially offset by a decline in guest count of 2.1%, was largely culpable for the weak same-store sales results.
Same-store sales at Ninety Nine grew 1.3% as a rise of 3.0% in average check was offset by a 1.6% fall in guest count. Same-store sales at Stoney River inched up 3.7% in the quarter, given a 10.3% increase in guest count, but were partially offset by a 6.0% decline in average check.
Same-store sales improved sequentially at Ninety Nine Restaurant and Stoney River Legendary Steaks.
During the quarter, the company also closed 19 underperforming restaurants.
Financial Aspects
O’Charley ended the year with cash and cash equivalents of $29.7 million, long-term debt of $117.2 million and stockholder equity of $178.2 million.
Our Take
The company had reported losses in the six consecutive quarters, however O’Charley’s is taking measures like cost control and closing down underperforming restaurants for profitable growth. To drive traffic, the company continues to focus on value menu offerings and great services, but it has a long way to go.
Estimates have not budged in the last 30 days for 2011, implying that the analysts do not see any meaningful catalyst for the time being. The Zacks Consensus Estimate for the first quarter of 2011 is earnings of 6 cents per share and a loss of 26 cents for 2011.
One of O’Charley’s competitors, Brinker International Inc. (EAT) reported second quarter 2011 adjusted earnings per share of 38 cents, surpassing the Zacks Consensus Estimate of 32 cents. The upside in earnings was driven by continued margin expansion at Chili’s and top-line growth at Maggiano’s.
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