Cosi Inc. (COSI), a premium casual dining restaurant chain, reported loss of 2 cents per share in the third quarter of 2010 as compared with the loss of 6 cents delivered in the prior-year quarter. The loss of the company narrowed down due to positive comparable same store sales growth and improvement in margins.
Total revenue, which comprises company-operated restaurant sales and franchise fees and royalties, dipped 9.7% year over year to $27.1 million in the quarter. Company-operated restaurant sales tumbled 10.8% to $26.3 million due to the sale of 13 company-owned restaurants to a franchisee in second quarter 2010. But franchise fees and royalty revenues soared 54.9% year over year to $0.8 million.
However, for the second consecutive quarter, system-wide comparable-store sales for third quarter 2010 jumped 5.2% from the year -ago quarter. The company-owned comparable-restaurant sales grew 6.6%, driven by a 3.7% rise in traffic and 2.9% increase in average guest check.
The same-store sales at franchise operated restaurants inched up 2.9%. Also, Cosi is benefiting from its marketing strategy to expand its customer base and drive traffic by providing catering services for breakfast as well lunch day parts.
Based in Deerfield, Illinois, the company’s restaurant operating margin perked up 320 basis points (bps) year over year to 12.3%, aided by a 100-bps contraction in cost of food and beverage, 60 bps decreases in both labor and related benefits and occupancy and other restaurant operating expenses.
Financial Position
Cosi ended the quarter with cash and cash equivalents of $11.5 million, shareholder’s equity of $14.4 million and almost no debt.
Our Take
We expect estimates to go up in the coming days as the company lowered its loss and is expanding its margin through cost control initiatives. Moreover, comparable same store sales are improving as the company is able to drive traffic, implying improvement in economic conditions.
Cosi currently operates 144 restaurants, of which 85 are company-owned and 49 are franchised locations.
Its prime competitors are Panera Bread Co. (PNRA) and Starbucks Corp. ( “>SBUX ).
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