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Restaurant results improve, headwinds remain

While another batch of first-quarter results from public restaurant companies offered some signs of an industry turnaround, executives cautioned that obstacles remain on the road to recovery.

Improved guest traffic and sales trends were reported last week by P.F. Chang's China Bistro Inc., Famous Dave's of America Inc., Ruth's Hospitality Inc. and Panera Bread Co., which followed similar results a week earlier from Chipotle Mexican Grill Inc., McDonald's Corp. and Brinker International Inc.

Not all reports were positive, however. Burger King Holdings Inc. blamed severe winter snow storms for much of a 6.1-percent dive in its chain’s U.S. same-store sales, though it noted that its check average and traffic had improved by the end of the quarter. Still, chairman and chief executive John Chidsey warned that the nation's high unemployment would continue to be a major challenge.

“The U.S. economy is showing mixed signs of improvement with recent reports on improved retail spending and consumer confidence," he said. "However, high levels of unemployment and underemployment will remain our industry’s biggest headwind.”

Buffalo Wild Wings Inc., which outperformed much of the industry during the recession, also was cautious about the future after reporting that same-stores rose only slightly in its March 28-ended quarter and turned negative for the first 27 days of April.

“While we believe that our previously-announced net earnings growth goal for 2010 of 20 percent may be achievable, improvement in same-store sales and moderate wing costs are key to meeting this goal,” said Sally Smith, the company's president and chief executive.

First-quarter earnings season continues next week with reports expected from Texas Roadhouse Inc., DineEquity Inc., Domino's Pizza Inc., Papa John's International Inc., Morton's Restaurant Group Inc., Einstein Noah Restaurant Group Inc., CEC Entertainment Inc., and California Pizza Kitchen Inc.

A selection of this week's earnings releases:

Buffalo Wild Wings Inc. (BWLD): The casual-dining company said first-quarter net income rose to $10.6 million, or 58 cents per share, from $8.5 million, or 47 cents per share, in the same quarter a year earlier. Revenue for the March 28-ended quarter grew 15.7 percent to $152.3 million, reflecting same-store sales increases of 0.1 percent and 0.7 percent at corporate and franchised restaurants, respectively. New restaurant openings, including 29 corporate and 57 franchised units, also helped increase revenue.

However, Buffalo Wild Wings said same-store sales had declined in April and cautioned that achieving earlier stated corporate goals would require improved sales and a moderation of wing prices in the commodities markets. 

Burger King Holdings Inc. (BKC): Burger King blamed the effects of severe weather on sales as it reported third-quarter net income of $41.0 million, or 30 cents per share, down 13 percent from year-ago earnings of $47.1 million, or 34 cents a share. Revenue slipped 1 percent to $596.9 million for the quarter, which ended March 31.

Global same-store sales declined 3.7 percent, which reflected a 6.1-percent dive in U.S. same-store sales. Burger King said winter weather in January and February affected U.S. same-store sales by 3 percent, but chairman and CEO John Chidsey noted that traffic turned positive in March. 

Famous Dave's of America Inc. (DAVE): The parent of the 175-unit barbecue chain said first-quarter profit more than doubled to $2.7 million, or 30 cents per share, from year-ago earnings of $1.3 million, or 15 cents a share. Helping the company's bottom line was a one-time, non-cash benefit of $2.1 million, or 15 cents per share, related to the purchase of seven formerly franchised locations and the termination of one lease.

Revenue for the April 4-ended quarter fell 3.5 percent to $32.6 million. Same-store sales fell 3.5 percent and 3.4 percent at company-owned and franchised locations, respectively. Latest-quarter sales results were an improvement from a year ago, when company locations saw same-store sales fall 5.5 percent and franchised unit same-store sales dropped 6.2 percent. 

Panera Bread Co. (PNRA): The company credited strong sales as first-quarter net income jumped 48 percent to $25.8 million, or 82 cents a share, for the quarter ended March 30, compared with year-ago profit of $17.4 million, or 57 cents a share. Latest-quarter revenue rose 14 percent to $364.2 million, which reflected same-store sales increases of 10 percent at company bakery-cafes and 9 percent at franchised branches.

Panera upped its outlook for the full fiscal year as sales continued to grow in the first 27 days of April, with a 10.3 percent year-over-year bump at company stores and a 10.4 percent increase at franchised restaurants. 

P.F. Chang's Bistro Inc. (PFCB): The company cited discounting and higher labor costs as first-quarter profit dropped 34.9 percent to $8.7 million, or 38 cents a share, from year-ago earnings of $13.3 million, or 57 cents a share. Revenue increased 0.2 percent to $310.4 million.

Same-store sales fell 2.7 percent at the company's namesake Bistro concept in the first quarter, as a 3.5-percent drop in the average check offset a 0.8-percent bump in traffic. At the fast-casual Pei Wei Asian Diner, same-store sales rose 2.2 percent on a 0.7-percent increase in average check and a 1.5-percent increase in traffic. With traffic improving, P.F. Chang's said it would do less discounting and increase menu prices between 1 percent and 2 percent in late May. 

Ruth's Hospitality Inc. (RUTH): The operator or franchisor of more than 150 upscale steak and seafood restaurants, including Ruth’s Chris Steak House and Mitchell’s Fish Market, said it earned $6.3 million, or 19 cents a share, in the quarter ended March 28, up 62 percent from earnings of $3.7 million, or 16 cents a share, in the same quarter last year.

Latest-quarter revenue remained flat at $94.7 million. Same-store sales fell 0.5 percent at company-owned Ruth’s Chris units, but rose 3.2 percent at franchised locations. Same-store sales at the company's Mitchell's Fish Market concept increased 2.4 percent.

Contact Molly Gise at [email protected].

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