California Pizza Matches Ests

California Pizza Kitchen, Inc. (CPKI), one of the leading casual dining restaurant chains, recently posted second-quarter 2010 earnings of 17 cents per share, consistent with the Zacks Consensus Estimate, but dropped 32.0% from 25 cents in the prior-year quarter.

The pizza restaurant chain said that total revenues for the second quarter dropped 4.6% year over year to $163.1 million, but outperformed the Zacks Consensus Estimate of $162.0 million. Comparable-store sales fell 5.9% in the quarter, lower than the year-ago period, but fared better than the guidance range of negative 6% to negative 7%.

In second quarter 2010, California Pizza Kitchen experienced a shortfall in its comparable store sales due to the absence of the “Thank You” Card promotion that boosted sales in the second quarter of fiscal 2009.
 
Comparable-store sales and traffic have sagged, as consumers with lower disposable incomes are dining out less or looking at cheaper alternatives, such as fast food restaurant operators like Yum! Brands Inc. (YUM - Analyst Report) and McDonald’s Corp. (MCD - Analyst Report).
 
In order to revive its top-line growth and plug its falling comparable-store sales, California Pizza Kitchen has implemented several sales-building programs. These initiatives include new menu offerings, a new wine list featuring over 30 distinctive wines, a central CPK Call Center to serve customers’ off-premise dining orders, as well as a catering program.
 
Additionally, to drive traffic, California Pizza Kitchen will reintroduce the thank-you card program, which will run through October 8, and also include a cash prize of $100,000. California Pizza Kitchen is also looking forward to the launch of two new licensed products outside the frozen category in August.
 
The company is so far experiencing an improvement in its third quarter same store sales, down just 0.9% year over year.
 
California Pizza Kitchen said that restaurant sales tumbled 4.6% to $160.3 million and royalties from the licensing agreement dropped 19.6% to $1.4 million, partially offset by international franchise revenues that rose 15.8% to $813,000 and domestic franchise revenues leaped 13.7% to $547,000.

The operating income of the company decreased 35.8% year over year to $5.7 million, as general and administrative costs and depreciation and amortization expenses were up.
 
Financial Position

The company ended the quarter with cash and cash equivalents of $9.0 million and shareholders’ equity of $199.8 million. As of July 4, 2010, California Pizza Kitchen’s total debt liability was nil.
 
Outlook
 
The casual dining operator now expects its third-quarter 2010 earnings in the range of 17 cents to 19 cents per share, compared with the current Zacks Consensus Estimate of 19 cents. Comparable-store sales are projected between negative 1.0% and positive 1.0% in third-quarter 2010.
 
Management expects to open two international full service franchised restaurants, one domestic franchised restaurant and four company owned full service restaurants in third-quarter 2010.
 
No update on Strategic Alternatives

On April 12, 2010, California Pizza Kitchen announced that its financial and strategic alternatives are being evaluated, which include alterations in its capital structure, exploration of sale possibilities, merger or other business combinations and opportunities. This process is still in progress and the company does not plan to comment unless an option is approved.

Founded in 1985, California Pizza Kitchen currently operates, licenses or franchises 261 locations, of which 206 are company-owned and 55 are either franchised or licensed.