NEW YORK High-end restaurant results are hitting new lows as slowed consumer spending and continuing budget cuts by corporate clients eat away at earnings.
McCormick & Schmick’s Seafood Restaurants Inc. and Morton’s Restaurant Group Inc. both said this week that lower traffic and resulting double-digit dips in same-store sales drove year-over-year declines in second quarter revenue and profit.
Though McCormick & Schmick’s of Portland, Ore., is known for seafood and Chicago-based Morton’s, for prime beef, the two high-end casual-dining operations shared some challenges in the latest quarter. Morton’s, operator of the Morton’s The Steakhouse chain, exhibited the greater struggle, however, as it reported this month a loss for the quarter and greater erosion in same-store sales. McCormick & Schmick’s was able to maintain a profit, albeit a much lower one than a year ago.
The results followed last week’s report from high-end operator Ruth’s Chris Hospitality Group, which also included double-digit declines in sales and profit. High-end seafood operator The Oceanaire Inc., which runs 12 locations of The Oceanaire Seafood Room, filed for Chapter 11 bankruptcy protection in early July and closed four locations. The sector has taken severe traffic hits not only from consumers that have tightened spending, but also from corporate clients that have cut back on travel and entertainment expenses.
“Corporate travel [and] spending remains weak, which supports our ‘stay-on-the-sidelines’ thesis in terms of the fine-dining-centric operators,” said securities analyst Nicole Miller Regan at Piper Jaffray in a research note Thursday.
For the second quarter ended June 27, McCormick & Schmick’s net income fell 49.6 percent from the same quarter a year ago to $1.2 million, or 8 cents per share. Revenue fell 7 percent to $92.7 million.
At the end of the quarter McCormick & Schmick’s operated 87 namesake restaurants in the United States and six Boathouse units in Canada, compared with 79 McCormick & Schmick’s locations and six Boathouse sites a year earlier.
McCormick & Schmick’s officials said quarterly same-store sales declined 17.3 percent. That falloff reflected a 16.7-percent decrease in guest traffic coupled with a 0.6-percent reduction in net pricing, the company said. Same-store sales had fallen 4.9 percent in the same quarter last year.
“While the challenging economic environment resulted in a decrease in comparable sales for the quarter, we are pleased with the impact our cost savings initiatives have had on our operating results,” chief executive Bill Freeman said. He added that he was “encouraged by the evolution of our marketing strategy as we focus on communicating to a broader audience to strengthen our connectivity to our guests.”
For the first half of fiscal 2009, McCormick & Schmick’s revenue totaled $184.6 million, down 3.9 percent from the same six months in 2008. Net income totaled $44,000, or nil cents per share, down from year-ago profit of $2.5 million, or 17 cents per share. Company officials said same-store sales fell 15.7 percent for the first 26 weeks of the year, compared with a 5.4-percent decline during the same time frame a year earlier.
McCormick & Schmick’s reaffirmed its full-year guidance of $370.0 million in revenue and earnings per share of between 25 cents to 30 cents. For fiscal 2008, the company booked revenue of $390.7 million and a net loss of $69.6 million, or $4.73 per share.
At Morton’s, executives said same-store sales fell 26.1 percent in the second quarter ended July 5, a result that drove a 19.8-percent decrease in quarterly revenue to $68.7 million. In the same quarter in 2008, same-store sales fell 1.9 percent.
The company had a net loss of $6.5 million, or 41 cents per diluted share, versus year-ago second-quarter net income of $1.7 million, or 11 cents per share.
The latest quarterly loss included a charge of $6.7 million after-tax, or 42 cents per share, related to an earlier announced settlement of a labor dispute, the company said.
Morton’ closed three steakhouses in June, ending the quarter with 81 restaurants, including 75 domestic and six foreign branches.
For the first half of fiscal 2009 ended July 5, Morton’s revenue dropped 18.9 percent to $143.0 million. Officials said same-store sales fell 24.9 percent following a dip of 0.5 percent a year earlier. The steakhouse company’s net loss totaled $8.6 million, or 54 cents per share, compared with earnings of $4.1 million, or 25 cents a share, in the first half of 2008.
Morton’s officials said they expect same-store sales to fall between 10 percent and 12 percent in the third quarter, and drop between 16 percent and 18 percent for the year.