Cosi Misses Zacks Estimate - Analyst Blog

Amid a sluggish economic environment plagued by heavy job losses and lower consumer discretionary spending Cosi, Inc. (COSI), a premium casual dining restaurant chain, recently reported dismal fourth-quarter 2009 results.

Cosi has reported a quarterly loss of 7 cents a share that missed the Zacks Consensus Estimate of a loss of 4 cents, and was more protracted than the loss of 5 cents delivered in the prior-year quarter.

On a reported basis, including one-time items, Cosi has reported a quarterly loss of 11 cents a share, a substantial improvement over the loss of 21 cents posted in the year-ago quarter.

Total revenue, which comprises company-operated restaurant sales and franchise fees and royalties, dipped 8.1% to $28.2 million in the quarter. Total system-wide comparable-store sales dropped 5.4%.

Company-operated restaurant sales tumbled 7.2% to $27.7 million, reflecting a 6.6% fall in comparable-store sales and the closure of four outlets since the end of third-quarter 2008. Cosi registered a decline in traffic of 5.9%, and a 0.7% fall in average guest check, which was adversely impacted by a 13.5% drop in catering sales.

Casual dining restaurant operators have been grappling with sagging comparable-store sales and declining traffic given the economic conditions, as cash-strapped consumers either preferred to dine out less or looked for cheaper alternatives, like fast food centers. Other operators in the casual dining segment are California Pizza Kitchen, Inc. (CPKI) and Red Robin Gourmet Burgers Inc. (RRGB).

Franchise fees and royalty revenue plunged 39.5% to $529,000, whereas franchise-operated comparable-store sales slid marginally by 0.8%.

Restaurant operating cash flow margin shrank 190 basis points (bps) to 6.7%, reflecting a 30 bps’ jump in cost of food and beverage, 140 bps’ increase in labor and related benefits and a 20 bps’ rise in occupancy and other restaurant operating expenses.

Cosi ended fiscal year 2009 with cash and cash equivalents of $4.1 million, shareholder’s equity of $9.3 million and almost no debt.

Cosi currently operates 145 restaurants, of which 99 are company-owned and 46 are franchised locations.