Kona Grill Inc., the grill-sushi chain, has seen strength in lunch sales, bucking a trend seen elsewhere in casual dining, the company’s CEO says.
“If you look at our daypart mix, we have seen really strong actually in lunch sales, which is little bit different on the industry,” said Berke Bakay, president and CEO of Scottsdale, Ariz.-based Kona Grill, in a Wednesday post-earnings call with analysts.
“A lot of our competitors talked about the weakness in lunch and how maybe some of the fast-casual players were taking market share,” Bakay said. “We have not experienced that.”
Those sales strengths led Kona to increase its same-store sales guidance for the full fiscal 2016 by half a percentage point, from 2 percent to 2.5 percent.
For the first quarter ended March 31, Kona said its same-store sales increased 3.6 percent, lapping a 2.2 percent gain in the prior-year quarter.
Christi Hing, Kona’s chief financial officer, said that included about 1 percent increase in price in the first quarter. Bakay added that traffic was up 1.1 percent in the period.
Bakay says Kona Grill introduced the first of the year’s four seasonal menus in the quarter with seven limited-time offers, including a crab roll and cappuccino butter cream pie, in the quarter, gaging results for research and development. “We utilize seasonal offerings to drive frequency and as a primary R&D vehicle for new permanent menu items,” he said.
“We have seen strong dinner, and we are seeing very strong happy hour offset with some weakness at late night,” Bakay said.
For the first quarter, Kona Grill reported a widened net loss of $1.7 million, or 15 cents a share, up from a loss of $925,000, or 8 cents a share, in the prior-year quarter. Restaurant sales increased 19.7% to $39.3 million from $32.8 million in the same period last year.
Bakay said Kona Grill has signed two development agreements for its first international expansion. On April 5, Kona entered into an agreement with Hakaya Collection, a subsidiary of RAK Hospitality Holding, for six franchised locations in the United Arab Emirates over the next seven years. Earlier in the year, the company signed an agreement with Grupo Roma for six franchise locations in Mexico over the next seven years.
“So given where we are and our size of units, that’s a pretty sizable amount of unit development that will give us very high margin fees in the future starting in the first part of 2017,” Bakay said.
Domestically, Kona expects to open eight restaurants in 2016. It opened its first restaurant of the year in Irvine, Calif., on April 12, and plans and to open two additional restaurants in Minnetonka, Minn., and Fairfax, Va., during the current second quarter.
Kona Grill owns and operates 38 restaurants in 20 states and Puerto Rico.
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