J. Alexander's Corporation Reports Sales and Income Gains for Third Quarter

Click here for financial tables

Same Store Sales Rise 7.2% For The Period

J. Alexander's Corporation (AMEX:JAX) today reported higher net sales and net income for the third quarter and first nine months of 2004.

For the third quarter ended September 26, 2004, J. Alexander's Corporation recorded net sales of $28,794,000, up 11.5% from net sales of $25,832,000 in the comparable period of 2003. Net income for the most recent quarter rose 49% to $265,000, or $.04 per diluted share, up from net income of $178,000, or $.03 per diluted share, posted in the corresponding period a year ago. Income before income taxes for the third quarter of 2004 reached $387,000, up from income before income taxes of $123,000 recorded in the third period a year ago.

"Our financial performance for the third quarter of 2004, as has been the case for most of the year, was solid with the exception of higher cost of sales and the disappointing sales performance and continuing operating losses of our two newest restaurants opened in the fourth quarter of last year," said Lonnie J. Stout II, chairman, president and chief executive officer. "The effect of the hurricanes on our four restaurants in Florida also negatively affected our performance for the quarter," he explained.

Cost of sales rose from 32.6% in the third quarter a year ago to 33.8% in the period just ended due primarily to consistently higher input costs in most of the Company's major food categories. Total restaurant operating expenses as a percentage of sales increased to 90.1% in the third quarter of 2004 from 88.3% in the same period of 2003.

Stout reiterated that the Company buys only fresh poultry, thus prices are not under contract. He pointed out that although prices have moderated somewhat, they remained at high levels throughout most of the third quarter. He also noted that while prices for most of the Company's beef purchases are fixed by contract until March of 2005, these prices will be significantly higher than those paid by the Company in the fourth quarter of 2003.

Stout said that while sales of the Company's two newest restaurants remain below expectations and they continue to post significant operating losses, he expects improvement over time. He said it will take them longer to reach profitability than management would typically expect for a new restaurant, but also noted that a number of the Company's now successful restaurants experienced slow sales builds.

The J. Alexander's Corporation CEO pointed out that the Company also posted another quarter of significant increases in same store sales. For the period just ended, the Company had average weekly same store sales per restaurant of $85,400, a gain of 7.2% over $79,700 in the comparable period of the prior year. These same store sales results are based on 24 restaurants open for more than 18 months and exclude the effect of a total of 24 days the Company's restaurants were closed in the third quarter of 2004, primarily due to hurricanes, and eight days restaurants were closed in the third quarter of 2003, primarily due to the mid-western power outage. Same store sales computed without adjustment for days the Company's restaurants were closed in the third quarters of 2003 and 2004 increased by 6.3%. For the most recent quarter, the average weekly sales per restaurant climbed 3.9% to $82,600 from $79,500 in the corresponding period of 2003.

"We were extremely pleased with same store sales results," Stout continued. "We estimate approximately $300,000 in sales were lost due to the hurricanes and severe weather which affected the southeastern United States in August and September. We experienced strong performance from the restaurants in the same store base despite the impact of these storms on sales and profitability, particularly on our four restaurants located in Florida."

During the third quarter of 2004, J. Alexander's Corporation did not record any pre-opening expenses, while for the third period of 2003, the Company incurred pre-opening expenses of $236,000. Also, the Company recorded $207,000 of non-cash compensation expense in its previously restated financial statements in the third quarter of 2003 in connection with a variable plan stock option award granted to the Company's CEO in 1999. The exercise price of the option was fixed in the second quarter of 2004, after which no further compensation expense was required to be recognized under current accounting rules.

For the first nine months of 2004, J. Alexander's Corporation recorded net sales of $89,430,000, up from net sales of $78,697,000 achieved in the same three quarters of 2003. Net income for the first nine months of 2004 reached $1,789,000, or $.26 per diluted share, a gain of 49% over net income of $1,202,000, or $.18 per diluted share, earned in the comparable reporting period of 2003. Income before income taxes was $2,631,000 in the first three quarters of 2004, up from income before income taxes of $1,712,000 reported in the same three periods of 2003. Last year's results included pre-opening expenses of $526,000 while no pre-opening expense was included in the first nine months of 2004. Last year's year-to-date results also included $329,000 of non-cash compensation expense recognized in connection with the variable plan stock option awarded in 1999.

Weekly average same store sales per restaurant, based on 24 restaurants open for more than 18 months and excluding the effect of lost sales days, increased 7.7% to $87,800 in the first three quarters of 2004 from $81,500 posted in the first nine months of 2003. Same store sales computed without adjustment for lost sales days in 2003 or 2004 increased 7.5%. For the first three quarters of the current year, the average weekly sales per restaurant rose 4.6% to $85,000 from $81,300 recorded in the first nine months of 2003.

According to Stout, the Company is continuing to evaluate development opportunities in its existing markets, as well as other major metropolitan areas previously targeted as promising upscale markets. No restaurants are planned for opening in the final quarter of 2004. However, J. Alexander's Corporation's goal is to open one or two new restaurants in 2005.

Stout said the final quarter of 2004 should reflect a continuation of same store sales growth. He also said that pressure on operating margins will continue from high input costs, including higher costs for some items caused by hurricane-related product shortages. He also noted that the Company expects to benefit from an extra week in its fourth quarter of 2004 resulting from a 53rd week which will be included in the current fiscal year.

"We continued to record robust sales increases in October from the restaurants in our same store sales base," he said. "While we remain very sensitive to our guest count trends, we are considering an additional price increase in selected restaurants in the fourth quarter," Stout explained. "We believe this will improve our cost of sales and provide us with an opportunity to reach our fourth quarter business plan targets."

J. Alexander's Corporation presently owns 27 J. Alexander's contemporary, upscale, American casual dining restaurants which place a special emphasis on food quality and professional service. The Company's restaurants are located in Alabama, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana, Michigan, Ohio, Tennessee and Texas. The Company is based in Nashville, Tennessee.

Discuss this article

Date Listed: 2004-11-04

More news about:
Industry: Restaurants
Category: Financial
J. Alexanders
Mail Me Print Me


	Main Categories Search Submit Help/FAQ Feedback


	Industries: Hotel \| Restaurant		Friday, November 26, 2004
	Restaurant Industry: News \| Jobs \| Discussions \| Real Estate \| Resources \| Suppliers \| Tradeshows \| Trends