Zacks_Analysts' Blog : In Line 3Q for BJ's Restaurants - Analyst Blog

BJ’s Restaurants Inc. (BJRI) reported third-quarter 2011 adjusted earnings of 24 cents per share, in line with the Zacks Consensus Estimate and higher than  the prior-year  earnings of 20 cents. The upside was attributable to double-digit growth in the top line and strong comparable restaurant sales growth.  

On a GAAP basis, quarterly earnings were 22 cents including 2 cents a share related to a lawsuit settlement expense.

Inside the Headline Numbers

Revenues in the reported quarter climbed 17% year over year to $151.0 million. The increase was attributable to solid increases in both comparable restaurant sales and new restaurant openings.

BJ’s sustained its top-line growth momentum in the third quarter on the back of operating efficiencies, innovative offerings and expansion, which have helped the casual dining restaurant operator to drive traffic.

Comparable restaurant sales grew 6.5% compared with 6.7% in the prior-year quarter.

Operating margin was flat year over year at 5.8%, reflecting a 50-bp plunge in labor and benefits costs, 10 bp drop in cost of sales, flat occupancy and operating costs and 30-bp fall in general and administrative expenses, offset by a 20 bps spike in depreciation and amortization and 50 bp rise in restaurant opening.

Store Update

The company opened 4 restaurants during the third quarter of 2011.

BJ’s is one of the few casual dining chains that has been expanding even in a weak economy. For fiscal 2011, the company plans to open 13 restaurants compared with 10 in fiscal 2010. The company’s plan is to debut 4 new restaurants in the fourth quarter, of which one has already been introduced and 3 will be unveiled before Thanksgiving.

The chain plans to open as many as 15 new restaurants in 2012.

Financial Position

BJ’s ended the quarter with cash and cash equivalents of $40.3 million and shareholders equity of $318.8 million. As of September 27, 2011, BJ’s long-term debt liability was nil.

Outlook

We expect estimates to go up in the coming days as the company posted strong results. We see the company as well positioned to sustain its growth momentum and generate improved earnings in future.

However, menu pricing is slightly lagging the company’s cost pressures and it plans to take some pricing action shortly.

One of BJ’s primary competitors, Darden Restaurants Inc. (DRI) posted first quarter 2011 earnings of 78 cents per share, in line with our consensus estimate, but down 3% from the year-ago quarter earnings.

BJ’s Restaurants currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.