With freakishly bad winter storms hammering away at businesses across the country, an analyst with Piper Jaffray is forecasting that many restaurant companies will be blaming negative performance on the weather in upcoming fourth-quarter earnings reports.
Nicole Miller Regan, senior research analyst with Piper Jaffray, took a closer look at the impact of winter weather — both in terms of location exposure and sales and profit sensitivity — on the public restaurant companies she follows for clients.
In a report issued this week, Regan concluded that Sonic, Brinker International and P.F. Chang’s China Bistro have the highest concentration of restaurant locations in weather-impacted states — which by Regan’s analysis included Georgia, Massachusetts, New York, Oklahoma, Pennsylvania and Texas.
The analysis, she noted, was conducted before blizzard conditions hit the Midwest this week.
Companies that hold the most earnings per share exposure to changes in same-store sales include Red Robin Gourmet Burgers, McCormick & Schmick’s and Morton’s, Regan’s analysis concluded.
Regan, who is based in Minneapolis, said weather is often cited as a factor in public company performance, but this winter has seemed particularly bad, with record-breaking snowstorms, frigid temperatures and flood-inducing rains.
“It’s rather unprecedented,” she said. “It has been week after week. We think this is going to be a real point of conversation.”
Regan used unit counts in select states as well as a company’s earnings per share sensitivity to same-store sales changes of 1 percent to track the potential impact for the companies she follows.
Sonic led the list of companies with the most restaurants located in winter weary states. The Oklahoma City-based company has 961 of its 3,572 locations — or 27 percent of its store base — in Texas alone, where multiple snow and ice storms have dampened Super Bowl festivities this weekend. Overall, 38.8 percent of Sonic units are located in states hit most severely by weather this winter.
Red Robin Gourmet Burgers is the company with the most exposure to its potential earnings per share, or what Regan calls “EPS sensitivity.” Red Robin, which is based in Greenwood Village, Colo. and operates or franchises about 450 locations, could be exposed to a 30.6-percent impact to earnings per share should same-store sales change by 1 percent, Regan noted. She estimated an actual per-share impact of 18 cents based on prior year performance and a 59-cents-per-share consensus estimate of earnings in 2011.
Contact Lisa Jennings at [email protected].