California Pizza Expansion on Track – Analyst Blog

Los Angeles-based California Pizza Kitchen Inc. (CPKI) recently announced that it has opened a 5,300 square foot restaurant in Jacksonville, Florida, which is the first restaurant in the Northeast of Florida. The company also opened its second restaurant − a 5,500 square foot establishment − in San Antonio, Texas.

 

In order to revive its top-line growth and comparable-store sales, California Pizza Kitchen keeps implementing several sales-building programs. These initiatives include new entrees, a new wine list featuring over 30 distinctive wines, a centralized call center to serve customers’ off-premise dining orders, as well as a catering program.

 

Apart from its popular offering, both the new restaurants will offer the menu additions − Four Seasons Pizza, Roasted Artichoke and Spinach Pizza, Baby Clam Linguini, Italian Deli Sandwich, Turkey Stack Sandwich and Butter Cake − to drive traffic.

 

California Pizza Kitchen remains on track to open eight full service restaurants in fiscal 2010. The company currently owns and operates 260 restaurants, of which 206 are company-owned and 54 are either franchised or licensed in 32 states and 10 foreign countries. In addition, California Pizza Kitchen’s franchisees plan to open eight international and five domestic locations in 2010.

 

We believe that with the opening of new restaurants in fiscal 2010, the company will continue to gain market share as we see a gradual improvement in the restaurant industry, which has faced extremely tough challenges during the economic turmoil that resulted in weak labor, tight credit markets, and lower discretionary spending.

 

California Pizza Kitchen’s closest competitor BJ’s Restaurants Inc. (BJRI) remains committed to opening as many as 10 to 11 new restaurants in fiscal 2010. Another peer, Buffalo Wild Wings Inc. (BWLD), is targeting a unit growth rate of 13% to 15% for fiscal 2010. This will intensify competition for California Pizza Kitchen.

 

Additionally, California Pizza Kitchen experienced a decline in its comparable-store sales in the months of April and May, resulting in the second-quarter 2010 guidance being trimmed. Management is now projecting a decline in the range of 6.0% to 7.0% in comparable-store sales and a drop in earnings of 10 cents to 15 cents per share, which is a sharp drop from its initial guidance. During the first quarter, California Pizza Kitchen expected comparable-store sales to decline in the range of 0.5% to 2.5% and earnings between 24 cents and 26 cents per share.

 

Founded in 1985, California Pizza Kitchen restaurants offer pizzas with non-traditional toppings such as BBQ chicken and Thai chicken as well as pastas, salads, sandwiches, appetizers and deserts. The company operates restaurants under three formats: California Pizza Kitchen – a full-service restaurant; CPK/ASAP – a fast-casual format; and LA Food Show – a full-service, casual dining with a varied menu.