Benihana Misses

Benihana Inc. (BNHNA), the operator of Benihana Teppanyaki, Haru and RA Sushi restaurant concepts, recently reported its fiscal first quarter results with a low single-digit rise in the top line but a sharp double-digit fall in the bottom line. Results were adversely affected by a softer sales trend and higher restaurant level costs amid a turbulent economy.
 
Total revenues for the quarter under review ascended 1.6% year over year to $96 million. Restaurant sales rose by 1.6% to $95.5 million, whereas franchise fees and royalties fell 5.2% to $507,000. By concepts, restaurant sales slipped 1.6% to $63.2 million at Benihana Teppanyaki restaurants and 14.8% to $10.1 million at Haru restaurants, but jumped 24.2% to $22.1 million at RA Sushi restaurants.
 
Benihana’s quarterly earnings of 5 cents a share was well below the Zacks Consensus Estimate of 11 cents, and fell sharply by 58.3% from 12 cents delivered in the prior-year quarter.
 
For the fiscal year, management expects total restaurant sales in the range of $305 million to $310 million and EPS in the range of 40 cents to 45 cents. Given the sluggish economic conditions and the completion of the renovation project, management now expects capital expenditure for the year to be $15 million, down from $48.8 million in the last year.
 
Benihana is facing the brunt of the economic turmoil plagued by rising unemployment. Consumers with lower disposable income are dining at home or are looking for cheaper alternatives such as fast food centers. Company-wide comparable restaurant sales slid 10.1% in the quarter. Restaurant operating profit margin also shrank 40 basis points to 12.8%.
 
Other casual dining operators – Red Robin Gourmet Burgers (RRGB - Analyst Report), Cosi Inc. (COSI - Snapshot Report), California Pizza Kitchen (CPKI), and Famous Dave’s of America (DAVE - Snapshot Report) – are faced with the same fate as Benihana.
 
By concepts, comparable sales declined 13.1% at Benihana Teppanyaki, driven by 11.6% and 1.7% fall in guest count and average guest check, respectively. Comps dipped 14.8% at Haru due to a 17.4% decline in guest count as well as a 16.6% drop in take-out sales, partially offset by a 4.2% rise in average guest check. On the contrary, comps at RA Sushi climbed 3.5% driven by 10.5% rise in guest count but was partially offset by a 6.7% fall in average guest check.
 
During the quarter, Benihana opened two RA Sushi and one Benihana Teppanyaki restaurants. The company currently operates 64 Benihana Teppanyaki restaurants, 9 Haru restaurants, and 25 RA Sushi restaurants.

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