May proves a cruel month for restaurant chains

NATIONAL REPORT The first companies to report May same-store sales results did not have positive news to share Wednesday, as Outback Steakhouse parent OSI Restaurant Partners posted declines at four of its casual-dining concepts, the Applebee's chain recorded continued declines and CBRL Group Inc., operator of 559 Cracker Barrel Old Country Store locations, also reported a comparable sales drop.

Even quick-service parent company CKE Restaurants Inc., which has posted positive results for some time, reported a dip in May same-store sales for its Carl's Jr. brand. Same-store sales for its Hardee's chain were positive for the 19th consecutive month, but not enough to yield positive blended results for CKE.

Some restaurant analysts had hinted just last week that May sales should be improved from the year earlier as weather this past month was not a problem throughout the country and many brands were lapping poor results from last year. Still, higher gas prices – at record levels in some states and still rising – and continued decreases in housing values could have kept consumers from spending money on dining out, other analysts contended.

"May should be free of weather excuses," securities analyst John S. Glass at CIBC World Markets said in a note to clients. "Next worry will be gasoline prices, which have recently hurt [casual dining] more than [quick service]."

At Tampa, Fla.-based OSI, domestic systemwide same-store sales fell 1.4 percent at Outback Steakhouse, 2.1 percent at Carrabba's Italian Grill, 2 percent at Bonefish Grill and 0.9 percent at Roy's. Same-store sales increased 1.2 percent at Fleming's Prime Steakhouse and Wine Bar for the May period, which comprised the four weeks ended May 26.

OSI, which operates or franchises a total of 1,457 under eight brands, has posted negative same-store sale trends, especially at its flagship chain, for more than a year. A pending buyout of the company, valued at more than $3.2 billion, is set for a shareholder vote June 5.

At Overland Park, Kan.-based Applebee's International Inc., which operates or franchises 1,938 namesake restaurants, domestic systemwide same-store sales fell 2.1 percent for the four weeks ended May 27. Same-store sales fell 1.9 percent at domestic franchised restaurants and 2.9 percent at domestic corporate locations, the company reported. The corporate locations recorded a decrease in guest traffic between 3 percent and 3.5 percent, Applebee's added.

The company, like OSI, is a potential buyout target since it began exploring strategic alternatives for the company in February, amid a two-year-plus string of declining sales.

At Lebanon, Tenn.-based CBRL, same-store restaurant sales fell 0.4 percent despite a 2-percent uptick in average check, aided by a 2-percent increase in average menu price, the company reported. Same-store retail sales increased 3.7 percent for the four weeks ended May 25.

Carpinteria, Calif.-based CKE posted a same-store sales drop of 0.9 percent at Carl's Jr. and a same-store increase of 0.6 percent at Hardee's. The company's blended result, which reflects both chains, dipped 0.1 percent for the four weeks ended May 21.

For the quarter ended May 21, Carl's Jr. same-store sales remained unchanged from the year before, while Hardee's same-store sales rose 1.8 percent, the company reported.

CKE said on Tuesday it had agreed to sell its La Salsa Fresh Mexican Grill chain to Baja Fresh for an undisclosed amount.

-Sarah E. Lockyer