Casual dining chain O’Charley’s Inc. (CHUX) recently reported disappointing second quarter 2010 results. General economic conditions and lower traffic largely affected results in the quarter.
The quarterly loss of 12 cents per share was wider than the Zacks Consensus Estimate of a loss of 4 cents and was down substantially from earnings of 13 cents delivered in the prior-year quarter.
O’Charley’s said that total revenue in the second quarter tumbled 6.0% year over year to $194.1 million. Management now expects total revenue for the third quarter 2010 in the range of $186 million to $192 million.
O’Charley’s, operating under its namesake along with Ninety Nine Restaurant and Stoney River Legendary Steaks, reported general and administrative expenses of $10.2 million, up 26.0% year over year. The restaurant level margin declined 230 basis points to 14.1%.
The Nashville-based O’Charley’s indicated that adjusted EBITDA in the quarter was $12.4 million compared with $18.9 million in the year-ago quarter. The company now expects EBITDA for the third quarter 2010 in the range of $7 million to $10 million.
Net loss from operations came in at $2.5 million, compared with net earnings of $2.8 million in the prior-year quarter. The company now expects a third quarter 2010 loss from operations in the range of $1 million to $4 million.
Segment Details
Same-store sales at the company’s O’Charley restaurants fell 7.9% year over year. A decline in guest count of 5.7%, coupled with an average check decrease of 2.4%, was largely culpable for the weak same-store sales results. Restaurant level margin at O’Charley’s restaurants dropped 260 basis points to 14.6%.
Same-store sales at Ninety Nine slipped 0.5% as a 0.4% rise in guest count was offset by a 0.9% fall in average check. Restaurant level margin contracted 230 basis points to 13.2%.
Same-store sales at Stoney River decreased 0.7% in the quarter as a result of an 8.0% decline in average check, but was partially offset by a 7.8% increase in guest count. Restaurant level margin showed a year-over-year increase of 530 basis points to 15.4%.
Financial Aspects
O’Charley ended the quarter with cash and cash equivalents of $25.9 million, long-term debt of $117.5 million and stockholder equity of $204.6 million. Capital expenditure for the quarter under review was $4.7 million.
Management Outlook
Management plans to upgrade its menus at a more reasonable price to cater to the weak spending environment. In order to plug falling sales, the company recently re-introduced 2 Meals, which consist of a full meal, beverage and value priced appetizers, priced at $14.99.
Appointment of CEO
The company also announced in June that CEO Jeffrey D. Warne had resigned. On August 2, 2010, O’Charley stated that new President and CEO David W. Head will join the company on September 1, 2010.
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