Orange County, California-based BJ’s Restaurants, Inc. (BJRI) reported second quarter 2011 adjusted earnings of 29 cents per share, surpassing the Zacks Consensus Estimate of 27 cents and 26.1% higher than 23 cents posted in the prior-year quarter. The upside in earnings was attributable to double-digit growth in the top line and strong comparable restaurant sales growth.
Quarter Highlights
Revenues in the reported quarter climbed 17% year over year to $152.9 million, but missed the Zacks Consensus Estimate of $153.0 million by a whisker. The year-over-year upside in revenues was attributed to higher number of operating weeks (up 10.2%) compared with the year-ago quarter.
BJ’s sustained its top-line growth momentum in second quarter 2011 on the back of operating efficiencies, innovative offerings (like introduction of lower calorie Enlightened Entrees menu offerings, increased number of beer taps) and expansion, which have helped the casual dining restaurant operator to drive traffic.
Comparable restaurant sales in the quarter witnessed a substantial growth of 6.9% compared with the jump of 5.3% in the prior-year quarter.
Operating margin climbed 40 basis points (bps) from the year-ago quarter to 6.9%, reflecting a 40-bp plunge in labor and benefits costs, 100-bp decline in occupancy and operating costs and 50-bp fall in general and administrative expenses, partially offset by 50 bps spike in cost of sales.
Store Update
BJ’s opened 3 restaurants during the second quarter of 2011, thus adding to its existing portfolio of 108 restaurants.
BJ’s is one of the few casual dining chains that has been expanding even in a weak economy. For fiscal 2011, the company plans to open 12 to 13 restaurants compared with 10 restaurants in fiscal 2010. The company plans to debut 4 new restaurants in the third quarter, of which one has come up and 3 to 4 in the last quarter of 2011.
Financial Position
BJ’s ended the quarter with cash and cash equivalents of $55.6 million and shareholders equity of $311.0 million. As of June 28, 2011, BJ’s long-term debt liability was nil.
Outlook
The company reported better-than-expected results and hence we expect estimates to go up in the coming days. The Zacks Consensus Estimates for 2011 and 2012 are pegged at $1.06 and $1.27, respectively.
We believe that the company is well positioned to sustain its growth momentum and generate improved earnings. Moreover, BJ’s offers investors one of the strongest growth stories in this space based on its unique position in the commoditized hyper-competitive bar and grill segment, a viable business strategy and a debt free balance sheet.
One of BJ’s primary competitors, Darden Restaurants Inc (DRI) posted fourth quarter 2011 earnings of $1.00 per share, in line with the Zacks Consensus Estimate, but up 23% from the year-ago quarter earnings of 81 cents per share.
