Earnings Up for BJ’s Restaurants

Despite a turbulent economy and rising unemployment, BJ’s Restaurants, Inc. (BJRI - Analyst Report) sustained its growth momentum in fiscal year 2009. The casual dining operator’s third-quarter 2009 profit soared 55.3% year-over-year to $3.2 million.

BJ’s quarterly earnings of 12 cents a share jumped 50% from 8 cents delivered in the prior-year quarter, but missed the Zacks Consensus Estimate by a penny.

The result for the quarter benefited from a 44.6% decline in restaurant opening costs due to the opening of two restaurants in the quarter as against six opened in the prior-year quarter. Revenue for the quarter also climbed 8.5% to $103.9 million.

Restaurant operating cash flow rose 18.4% to $19 million, whereas restaurant operating cash flow margin expanded 150 basis points to 18.3% but narrowed 60 basis points sequentially.

With about 89 restaurants, management believes the system can support at least 300 restaurants with ample growth opportunities in the California and Texas markets. However, in response to a sluggish economy, the company has slowed unit growth to a planned 12.2% in 2009. Management plans to open 10 restaurants in fiscal year 2009 compared to 15 opened last year. So far, seven restaurants have been opened. In fiscal year 2010, management plans to open 10 to 11 restaurants.

Restaurants in the casual dining segment are experiencing sagging comps and declining traffic with cash strapped consumers shifting to low-priced dining options or eating at home. Other operators in the segment are Darden Restaurants Inc. (DRI - Analyst Report), Red Robin Gourmet Burgers Inc. (RRGB - Analyst Report) and Luby’s, Inc. (LUB - Snapshot Report).

Comparable-restaurant sales for the quarter dropped 1.6% compared to a decline of 1% experienced in the prior-year quarter. However, comps surpassed the expected Knapp-Track Industry average of negative 6% for casual dining comparable sales. Traffic counts fell 4% in the quarter.

Management expects traffic count to remain under pressure in the fourth quarter and into 2010, since two-thirds of the company’s restaurants are located in areas with higher unemployment rates. For the first three weeks of October, traffic count fell about 3% compared to the same period last year.

BJ’s ended the quarter with cash and cash equivalents of $12.7 million, long-term debt of $7 million and shareholders’ equity of $247 million. Management expects capital expenditure in the range of $56 million to $60 million for fiscal year 2009, and for fiscal year 2010, it is expected to be approximately $60 million.

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