O'Charley's Beats on Higher Gains - Analyst Blog

Nashville-based O'Charley's Inc. (CHUX) reported profit in the first quarter of 2011, after incurring losses in six consecutive quarters. The positive results were driven by improved comps across all three brands due to higher traffic.

The company reported earnings of 9 cents per share, beating the Zacks Consensus Estimate of 5 cents and a loss of 8 cents per share delivered in the prior-year quarter.

O'Charley's reported total revenue of $265.0 million in the first quarter, down 0.8% year over year due to a 2.2% drop in restaurant sales, which offset the 1.5% upside in comparable restaurant sales.

Inside the Headline Numbers

Same-store sales at the company's O'Charley's restaurants inched up 0.4% year over year on the back of higher guest count (up 0.9%).

Same-store sales at Ninety Nine grew 3.1% as guest count improved 0.9%. Same-store sales at Stoney River jumped 8.4% in the quarter attributable a 13.9% increase in guest count.

O'Charley's reported consolidated general and administrative expenses of $11.0 million during the quarter, up 0.9% year over year. The restaurant level margin declined 110 basis points to 14.7%.

Casual dining chain O'Charley's posted adjusted EBITDA of $18.5 million in the quarter compared with $21.5 million in the year-ago quarter. The company now expects EBITDA for the second quarter of 2011 in the range of $9 million to $12 million.

Financial Aspects

O'Charley ended the quarter with cash and cash equivalents of $36.5 million, long-term debt of $117.0 million and stockholders' equity of $181.1 million.

Outlook

Management expects total revenue for the second quarter in the range of $190 million to $195 million and income from operations in the range of a loss of $1 million to earnings of $2 million.

Our Take

O'Charley's efforts to focus on value menu offerings and great services to drive traffic and the closure of underperforming stores last year to control cost have finally paid off as the company reported profit after six straight quarters of losses. Estimates are expected to go up in the coming days. The Zacks Consensus Estimates for the second quarter of 2011 and fiscal 2011 are loss of 5 cents per share and 32 cents, respectively.

One of O'Charley's competitors, BJ's Restaurants, Inc. (BJRI) reported first quarter 2011 adjusted earnings of 25 cents per share, exceeding the Zacks Consensus Estimate of 19 cents driven by strong comparable restaurant sales growth.