Market headwinds in January and February led Bojangles Inc. executives to issue guidance Tuesday that same-store sales would be flat to a low-single digit increase for the full 2017 year.
Same-store sales took a sharp decline in February, said John Jordan, chief financial officer for the Charlotte, N.C.-based chicken and biscuits chain, in a post-earnings call with analysts. He surmised that the slow release tax refunds might have contributed to the decline.
“It fell off the ledge in February,” added Cliff Rutledge, Bojangles CEO, “and for something that dramatic, it wasn't just us. I mean we're hearing that from the entire industry.”
For the fourth quarter ended Dec. 25, Bojangles said systemwide comparable restaurant sales increased 2.4 percent with company operated units seeing increases of 1.1 percent and franchised restaurants posting a 3.2 percent increase.
However, Jordan said preliminary company same-store sales were down 3.5 percent for the first 10 weeks in the first fiscal quarter of 2017 and systemwide they declined 1.7 percent. “While still negative,” he said Tuesday, “we have seen some improvement over the past two weeks over our February trends.”
Jordan said Bojangles would need to see sustained improvement before claiming the trend had turned. “We still feel like the consumer has been volatile,” he said, “and it's been very hard to project and predict even day-to-day, week-to-week.”
The guidance led Andy Barish, an analyst with Jefferies, to take a conservative approach to Bojangles’ same-store sales for the year, reducing this projections to 0.3 percent for the system, down from a previous forecast of a 2 percent increase.
“The environment is clearly challenging,” Barish said in a note, adding that “we believe the company's brand, menu innovation, increased local-store marketing and technology are both near- and long-term drivers.”
While Bojangles has promoted a “4 for $4” breakfast, Rutledge said the company has hesitated in deep discounting.
“That's one thing that's great about our company is we're pretty nimble and can do that pretty much over a weekend if that's what we choose,” he said, adding that the company might offer new values in pricing or bundling.
Executives said Bojangles expects a net increase of 49 to 54 restaurants this year, of which 19 to 20 will be company-operated units and 30 to 34 will be franchised. That includes the planned refranchising of five restaurants in May.
Restaurants opened in 2014 and 2015 were producing average unit volumes slightly higher than the company average, Jordan said, booking about $1.6 million each in sales.
The company has recently opened the new markets of Kentucky and West Virginia, and newer stores may include components of the new Bojangles prototype debuted in Greenville, S.C., earlier this year.
That prototype, which features a “Biscuit Theater,” has been open seven weeks, Rutledge said, and has exceeded expectations. “We're excited about getting the next two or three open,” he said.
More customers are dining inside the store, which eases some of the drive-thru speed of service, he said. And employees are expressing satisfaction, especially with uniforms “that are a bright, shiny, new penny.”
The company will work on getting costs in line, he said, before expanding the prototype further, although the prototype kitchen platform is going into most new units.
For Bojangles fourth quarter, the company reported net income rose 25.2 percent to $9.8 million, or 26 cents a share, from $7.8 million, or 21 cents a share, in the prior-year quarter. Revenues rose 8.3 percent, to $139.4 million from $128.8 million in the same quarter last year.
As of Dec. 25, Bojangles' had 716 restaurants, of which 309 were company-operated and 407 were franchised. Most of the restaurants are in the Southeastern United States.
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