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Free Hospitality Publications
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Restaurant Industry News
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Tuesday October 24th, 2006 |
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Cosi Reports Third Quarter Sales
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Cosi, Inc. (NASDAQ:COSI) today reported that new restaurant openings contributed to 7.0% growth in total revenues for the third quarter ended October 2, 2006. |
Total revenues for the quarter were $33.0 million compared to $30.8 million in the 2005 quarter. Company-owned net restaurant revenues grew 6.4% in the quarter to $32.8 million, compared to $30.8 million in the previous year's quarter. Franchise fees and royalty revenues added $195,000 for the quarter compared to $25,000 in the 2005 quarter.
Difficult macro economic factors affecting much of the restaurant industry adversely impacted Cosi's comparable restaurant sales in the third quarter of 2006. Restaurants in operation for more than 15 months recorded an aggregate 4.2% sales decline from the 2005 third quarter. Cosi noted that while customer satisfaction remained at industry-leading levels and new guests grew 3% in comparable restaurants, customer frequency declined in the quarter.
Due to the margin impact of the comparable sales decline and 14 new company-owned restaurants in their first quarter operation ramp up, Cosi expects a third quarter loss per share of approximately ($0.05), excluding the effect of stock-based compensation expense. Given the expected third quarter performance, the Company also revised 2006 full year guidance to an expected range between ($0.09) and ($0.11) loss per share, excluding the effect of stock-based compensation expense.
Kevin Armstrong, Cosi's President and Chief Executive Officer, stated, "Cosi has responded to the difficult consumer environment of the third quarter by concentrating on marketing initiatives designed to drive more frequent guest visits and new food and beverage offerings that are consistent with Cosi's distinct, high quality heritage. Importantly, we are adhering to our strict cost disciplines while continuing to execute our growth plans. We have seen some early, encouraging signs for rebounding consumer demand in recent weeks, but we believe it is prudent to maintain a cautious outlook for the remainder of the year."
Development Update
Cosi said that 17 company-owned locations have opened year-to-date, including 14 of the 18 locations previously identified as the 2006 development goal. The remaining locations are under construction and expected to open this year.
In addition, two franchised locations were opened in the third quarter for a total of eight franchise locations in operation. Development continues on the remaining 17 franchise locations in the 2006 goal. Of the 17 additional locations, Cosi expects eight to be open by the end of the year with the remaining nine under construction or in training. These restaurants are all projected to open in the first quarter of 2007. The company added that it currently has secured commitments from 27 franchise area developers for 296 Cosi restaurant locations. These location commitments include 45 new restaurants scheduled to open in 2007.
Currently, there are 109 company-owned locations and eight franchise locations, 31 of which employ the new generation design, which is proving that its enhanced service format in a tasteful contemporary environment creates high customer appeal, an improved operational design, and strong unit return economics.
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