California Pizza Kitchen, Inc. (CPKI) recently posted first quarter 2011 earnings of 9 cents per share, which was above the Zacks Consensus Estimate of 6 cents per share and the company’s guided range of 3 cents to 5 cents per share. However, reported earnings missed the prior-year quarter earnings by a penny.
The better-than-expected results were driven by menu optimization program, which focus on higher margin menu items and cost control.
Inside the Headlines Numbers
The pizza restaurant chain reported total revenue of $156.0 million, down 0.5% year over year and below the Zacks Consensus Estimate of $158.0 million.
Comparable store sales fell 2.1% in the reported quarter, as inclement weather conditions adversely impacted same-restaurant sales growth.
In order to revive its top-line growth and improve its comparable store sales, California Pizza Kitchen plans to introduce new menu offerings and create brand awareness. Moreover, the company continues to focus on cost savings in order to drive margin.
Restaurant sales inched down 0.6% to $153.5 million. However, royalties from the licensing agreement rose 0.8% to $1.1 million, international franchise revenues climbed 9.7% to $0.6 million and domestic franchise revenues leaped 13.1% to $0.8 million.
The restaurant operating margin contracted 80 basis points (bps) to 16.1%, due to a 50-bp rise in food, beverage and paper supplies cost, a 30-bp spike in labor cost and a 10-bp upside in direct operating and occupancy expense.
The company ended the quarter with cash and cash equivalents of $17.1 million and shareholders’ equity of $197.2 million. As of April 3, 2011, California Pizza Kitchen has no debt on its balance sheet.
During the quarter, California Pizza Kitchen opened one company-owned full-service domestic restaurant. California Pizza Kitchen also opened two franchised international restaurants in Mexico and India.
Management expects to open two international full-service franchised restaurants in second quarter 2011.
The casual dining operator expects second quarter 2011 earnings in the range of 20 cents per share to 21 cents per share, in line with the current Zacks Consensus Estimate. Comparable store sales are forecasted between 0% and positive 1.0% for second quarter 2011.
The company posted negative comps during the reported quarter, but expects the trend to improve slightly in the next quarter. However, estimates remained unchanged in the last 60 days for 2011 and 2012, implying that the analysts do not see any meaningful catalyst for the time being. The Zacks Consensus Estimates for 2011 and 2012 are pegged at 71 cents per share and 85 cents per share, respectively.
One of California Pizza Kitchen’s primary competitors, Chipotle Mexican Grill, Inc. (CMG) reported first quarter 2011 earnings of $1.46, which surpassed the Zacks Consensus Estimate of $1.43 on the back of strong top-line growth buoyed by higher traffic count and new restaurant openings.