P.F. Chang’s EPS Surges

P.F. Chang’s China Bistro (PFCB - Snapshot Report) known for traditional Chinese and pan-Asian cuisine, delivered better than expected second quarter results. EPS for the reported quarter climbed 24.4% year over year to $0.51, surpassing the street estimate of $0.41. On a reported basis, EPS jumped 25.6% to $0.49. The total revenue, however, remained flat at $301.4 million, showing a marginal decline of 0.1%, but beat street's estimate by $1.5 million. Management expects total revenue to increase in the range of 1% to 2% in the fiscal year 2009. 

The growth in EPS was driven by a decline in cost of sales (down 3%), labor costs (down 1.9%), operating costs (down 1.1%), and occupancy costs (down 0.6%). However, the major driver was pre-opening cost, which declined substantially by 74.5% due to the opening of one restaurant in the reported quarter as against nine in the prior year quarter. Management now expects EPS for the fiscal year 2009 in the range of $1.60 to $1.65, up from the prior guidance of $1.45 to $1.50. 

The company operates two restaurant concepts one as P.F. Chang’s China Bistro restaurants and the other Pei Wei Asian Diner. Revenue at P.F. Chang’s China Bistro declined 2.1% to $227.1 million, whereas at Pei Wei Asian Diner revenue increased 6.7% to $74.2 million. 

Same-store sales at P.F. Chang’s China Bistro restaurants plummeted 6.8% due to a significant fall in traffic counts and a slight decline in average guest check. The monthly fall in same-store sales for the reported quarter was 6.6%, 7.3%, and 6.5% in April, May and June, respectively. 

Same-store sales at Pei Wei Asian Diner showed a marginal decline of 0.1% due to the decline in average guest check. However, traffic counts increased at the restaurants. Same-store sales remained flat in April, rose 0.7% in May but dipped 1.0% in June. 

Like P.F. Chang’s China Bistro other casual dining operators – Cosi Inc. (COSI - Analyst Report), Ruby Tuesday (RT - Snapshot Report), California Pizza Kitchen (CPKI - Analyst Report), Red Robin Gourmet Burgers (RRGB - Analyst Report) and Famous Dave’s of America (DAVE - Snapshot Report) – are all facing the brunt of the recession with falling same-store sales and declining traffic. The consumers with lower disposable income are either shifting to quick service restaurants because of their lower priced menu or are dining at home. 

The Zacks Rank for PFCB stock is #3 (Hold).