Restaurant VIP Card News Article

Einstein Noah to focus on lunch, catering

4 Mar, 2013 by Restaurant VIP Card staff, via nrn.com

Company aims to combat sales softness with menu initiatives

One-time expenses weighed down fourth-quarter results for Einstein Noah Restaurant Group, but officials said menu initiatives on deck this year will help the bagel company navigate the still-choppy economic climate.

Like other public companies reporting this month, Einstein Noahs chains including Einstein Bros Bagels, Noahs New York Bagels, and Manhattan Bagels saw CsoftnessD in sales in January, which executives blamed on the payroll tax increase and other pressures on consumer discretionary income.

In a Thursday call with analysts, however, Jeff ONeill, Einstein Noahs chief executive, said it was Cnothing thats insurmountableD and February sales have picked up.

The choppiness of the first quarter is nothing new, he added. CThe last three years really have been choppy. I dont see any difference in this year. Its not easier, but its not harder,D he said. CI think that were just in a much better position to face it this year, maybe, than we have been in others.D

With new initiatives on deck for 2013, ONeill expressed optimism about the year ahead, saying the company remains focused on its mantra: Cbest at bagels, win at coffee and compete at lunch.D

Lunch options will also be expanded with more of a value message and a new line of CBig EatD sandwiches.

In recent weeks, the company rolled out nationally new Ceveryday valueD combination meal options at $3.99 and $5.99. CBased on tests we did last year, we feel confident that we are going to get our traffic moving in the right direction and get our lunch business growing as effectively as we have with our breakfast daypart,D ONeill said.

Einstein Noah has been growing its catering business, which now accounts for about 8 percent of sales in 2012. The company plans to continue that growth by boosting customer awareness of catering with search engine marketing, ONeill said.

Also in test are extended hours, and the company is poised to roll out what ONeill described as a Csort of happy hour.D

The company is also testing TV advertising and plans to roll out a simplified menu board, which has boosted traffic in test markets.

ONeill said cost-saving initiatives have also resulted in savings of about $11 million over the past two years. This year, the company is committed to saving another $2.5 million to $5 million from efficiencies in packaging, supply contracts and distribution center rationalization, which he said would help offset the expected 2 percent to 3 percent increase in commodity costs in 2013 though the company also plans a modest menu price increase of 1 percent.

Net income for the quarter ended Jan. 1 was $3.2 million, or 18 cents per share, which included about $3 million, or 15 cents per share, for the completion of a strategic alternative review process and settlement expenses. Last year the company looked into alternatives such as a possible merger or sale, but in the end recapitalized existing loans.

That was a 48-percent decline compared with a year ago, when net income was $6.1 million, or 36 cents per share, which included the extra week and restructuring expenses related to the closure of five food commissaries.

Systemwide same-store sales during the quarter increased 1.4 percent, the highest of the year, boosted by a 3.9-percent increase in average check that included a 1-percent menu price hike coupled with growth from catering and specialty beverages.

Same-store sales at company-owned restaurants rose 1.1 percent, and they increased 2.2 percent at franchised and licensed restaurants for the quarter.

Revenue decreased 3.9 percent to $110.6 million, including an extra week in the fourth quarter of 2011 that accounted for about $7.3 million in revenues. Excluding that week, revenue increased 2.6 percent for the quarter.

The company opened 55 restaurants during 2012, ending the year with 816 units across 39 states, of which 461 were company-owned.

In 2013, Einstein Noah expects to add 60 to 80 units, including 15 to 20 company-owned restaurants, 15 to 20 franchised, and 30 to 40 licensed units.

For the year, net income was $12.7 million, or 74 cents per share, compared with $13.2 million, or 78 cents per share, in fiscal 2011.

Same-store sales rose 1 percent for the year, and revenue increased 0.8 percent to $427 million from $423.6 million. Excluding the extra week, revenue rose 2.6 percent.

Contact Lisa Jennings at lisa.jennings@penton.com

Follow her on Twitter: @livetodineout

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