BJ’s Restaurants Inc. (BJRI), reported third quarter earnings of 20 cents per share, surpassing the Zacks Consensus Estimate of 15 cents, a rise of 67% from 12 cents posted in the prior-year quarter. The better-than-expected results were driven by comparable-store sales growth and higher traffic, both of which leaped for the third consecutive quarter.

Revenues for the quarter under review soared 24% year-over-year to $128.8 million and also outperformed the Zacks Consensus Estimate of $124.0 million. The upside in revenues was helped by 14% more operating weeks, compared to the year-ago quarter. Comparable-restaurant sales for the quarter grew substantially by 6.7%, on a drop of 1.6% witnessed in the prior-year quarter.

Based in Orange County, California, BJ’s sustained its growth momentum in the top-line in third quarter 2010 on the heels of operating efficiencies and innovative offerings, which have helped the casual dining restaurant operator to drive traffic.

Operating margin climbed 150 basis points from the year-ago quarter to 5.8%, reflecting a 20-basis point (bps) drop in labor and benefits costs, 60-basis point decline in occupancy and operating costs, 40-basis point fall in general and administrative expenses and 80-basis point dip in cost of sales.

Store Update

BJ’s with a chain of about 101 restaurants opened 4 restaurants during the third quarter of 2010. Two new restaurants are set to open in the fourth quarter of 2010, of which one has already opened and the second one is expected to open before Thanksgiving.

BJ’s is one of the few casual dining chains, which has been expanding in a weak economy. In fiscal 2011, the company plans to open 12 to 13 restaurants compared to 10 restaurants in fiscal 2010.

Financial Position

BJ’s ended the quarter with cash and cash equivalents of $30.0 million and shareholders equity of $276.8 million. As of September 28, 2010, BJ’s long term debt liability was nil.

Outlook

We believe that the company is well-positioned to sustain its growth momentum while generating improved earnings. Moreover by boasting a unique position in the commoditized hyper-competitive bar and grill segment, a viable business strategy and a debt free balance sheet, BJ’s Restaurants offer investors one of the strongest growth stories in this space.

 
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