Ignite Restaurant Group Inc. is focusing on turning around struggling sales trends at its Joe’s Crab Shack brand, following the sale of the Romano’s Macaroni Grill and a management shakeup, executives said Monday.
The Houston-based casual-dining company reported a same-store sales decrease of 3.8 percent at its 138-unit Joe’s chain during the first quarter ended March 30. Same-store sales rose 5.4 percent at its 23-unit Brick House Tavern + Tap concept.
Ignite president and CEO Ray Blanchette called Joe’s declining sales “clearly unacceptable” in an earnings call with analysts.
“We're not seeing the repeat guest visits a unique brand like Joe's should expect,” Blanchette said. “As indicated by the strong initial volumes in most of our new locations, we're getting trial visits. Unfortunately we're not converting those trial visits into regular customers.”
Blanchette said Ignite management had gotten into a “margin management mode” rather than working to build sales.
“The price of shellfish and shrimp increased dramatically, and we focused our operators on hitting targets around labor productivity and managing costs,” he said. “These are important metrics, clearly, but not nearly as important as delivering a great guest experience and creating lifelong fans of Joe's.”
Blanchette said he and David Catalano, who in April was promoted to chief operating officer in a management reorganization, would focus Joe’s Crab Shack on service, friendliness and cleanliness.
“Being the nation's only national crab house gives Joe's a defendable position, but we need to do more than defend,” Blanchette said.
Joe’s will debut a marketing campaign that distinguishes the brand in casual dining. While it will focus on new menu items, it will also highlight the Joe’s Crab Shack experience.
“We have to reincorporate experience back into the external messaging,” Blanchette said. “I think that's the piece that's been missing for the last couple of years.”
The next marketing campaign, highlighting lobster, will begin in June and feature the stronger experience message, he said.
Ignite reported Monday a $22.2 million loss for the first quarter, reflecting its sale in April of Romano’s Macaroni Grill.
The company reported a loss of 87 cents a share, which widened from a loss of $265,000, or one cent a share, in the first quarter a year ago. The loss from continuing operations, which excluded Macaroni Grill, was $3.2 million, or 12 cents a share, compared with profit of $145,000, or one cent a share, in the same period last year, the company said.
Ignite’s revenue for its two remaining brands, Joe’s Crab Shack and Brick House Tavern + Tap, fell 0.7 percent, to $122.2 million, from $123.1 million in the prior-year period.
Analysts expressed concern about Ignite’s first-quarter results.
David Tarantino, an analyst with Baird Equity Research, noted Monday that “we remain somewhat concerned about continued sluggish trends for the core Joe's concept. While the stock could represent a good value for patient investors given opportunity for IRG to deliver better performance over time, we suspect near-term investor sentiment could remain cautious until Joe's shows better top-line momentum.”
Nicole Miller Regan, senior research analyst with Piper Jaffray & Co., noted: “While management refocuses efforts to build momentum at its original core brands, the lack of stability in results concerns us.”
Regan added, “We do believe we have asked investors to be patient enough. On a high level, the casual-dining segment of the restaurant industry continues to experience a certain level of stability that is not being achieved at Ignite's core JCS brand, with comps still negative and progressively so on a two-year basis. While its growth concept BHTT experiences share gains, it is of modest contribution given its size.”
Ignite has 161 casual-dining restaurants, including 138 Joe’s Crab Shack locations and 23 Brick House Tavern + Tap units.
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