Cosi announced comparable restaurant sales for the first quarter and, while not a disaster by any means, it seems that March was a soft month for a number of companies I track.


COSI released comparable restaurant sales results for the first quarter today after the close.  Company-owned comparable restaurant sales grew 3% in the quarter.  The number was comprised of 1.5% price and 1.5% average check and implied two-year average trends of -0.7% or 40 basis points below 4Q.  This is a disappointment because, as the chart below illustrates, the last three quarters had brought sharp gains in the two-year trend for company owned restaurants’ comparable sales growth. 





During the 4Q10 earnings call on March 28th, management disclosed that company comparable store sales had grown 1.6% in January and 6.2% in February.  Assuming equal weights for each of the three months would imply March comps came in at roughly 1.2%, which is a disappointing number.  However, while the market may react negatively to this print tomorrow, I think there is one important caveat to keep in mind.  March of 2010 was the first month of the year where company comparable restaurant sales growth was positive. 


Clearly March of this year had a difficult comp.  If the company can produce a one-year comp better than -3.3% for 2Q, the two-year average trend for COSI’s company comps will turn positive.  With that in mind, March 2011 comparable sales being up 1.2% versus a positive March 2010 is not quite as bad as many may initially fear.  Thus far this earnings season, a number of companies including EAT and PFCB have reported soft March comps.


I believe the sales trends in 2Q11 have accelerated from the 1Q11 level.  


Howard Penney

Managing Director

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