BJRI
On the surface, the quarter looks good, but the traffic decline is a negative. BJ's Restaurants (BJRI) 2Q23 GAAP EPS of $0.50 beats by $0.15, but Revenue of $349.67M (+6.1% Y/Y) misses by $0.38M. Comparable restaurant sales increased by 4.7% vs FS 4.5%, and total restaurant operating weeks increased by 1.3%.
For the quarter, the pricing was similar to check up 7.5%, implying traffic was down around 3%. The company will be lapping a 2% price increase in August. With aggressive pricing restaurant margin beat by +110bps, and the adjusted EBITDA margin beat by +140bps, with the cost of sales 60bps lower than expected. The SSS beat, and revenue miss suggests operational issues with the box. That said, BJ's continues to open new restaurants, but due to increased construction costs, it is developing a new prototype to reduce build costs. The company remains committed to achieving strong EBITDA and earnings growth by reaccelerating new restaurant expansion, driving consistent comp sales, and expanding restaurant margins. Can they do this without raising prices aggressively?
SG
Why is this stock up 122% in the past three months? Sweetgreen (SG) 2Q23 GAAP EPS of -$0.24 misses by $0.02. Revenue of $152.53M (+22.1% Y/Y) misses by $3.62M. Comps 3% vs FactSet 4.6%. SG is one of a few restaurant companies that use "adjusted EBITDA" to make the number look better than reality. The company was mentioned on this call 11 times, and the next largest number was PLAY, who mentioned it 21 times on their last earnings call.
In the second quarter, revenues reached $152.5 million, a 22% increase YoY. Same-store sales also grew by 3%, driven by a 4% increase in price and a 2% increase in traffic, partially offset by a 3% mix offset attributed to early investments in Sweetpass and channel movement. The company reported restaurant-level profit margin for 2Q23 improved to 20.4% or 185bps. Food, beverage, and packaging costs remained at 27% of revenue, consistent with the second quarter of 2022. Labor and related costs improved to 29% of revenue, down 100 basis points from the comparable period in 2022, and occupancy was down 380bps. EBIT loss for 2Q23 was -$31.2 million versus -$42.2 million last year and only slightly better than the -$35.3 million in 1Q23. For 2023 we are estimating an EBIT loss of -$143 million versus a loss of -$193.3 million in 2022. Free cash flow -$19.4 million, and the company will burn -$100 million in cash in 2023. The losses will continue for as far as the eye can see!
TXRH
A mixed message with TXRH reporting 2Q23 EPS $1.22 FactSet $1.20 on revenue in line with consensus. Company comps +9.1% better than FS +8.5%, and Franchise comps +9.2% beat FS +6.2%.
- In 2Q23, reported revenue growth of 14.3%, mainly driven by an 8.7% increase in average unit volume and 5.6% growth in store week sales. Restaurant margin dollars of 8.3% to reach $182.8 million, contributing to a 14.7% increase in earnings per diluted share, which amounted to $1.22.
- AWS was $147,000 during the second quarter, with to-go sales accounting for approximately $18,500 or 12.6% of total weekly sales. It is worth noting that this quarter marked the first time since the reopening of our dining rooms that average weekly to-go sales dollars increased year-over-year.
- Comparable sales grew by 9.1%, fueled by a 4.7% increase in traffic and a 4.4% rise in average checks. By month, comparable sales demonstrated consistent growth, with April, May, and June periods recording 8.7%, 8.8%, and 9.7% growth, respectively. The positive momentum has continued into the first four weeks of the third quarter, with weekly sales averaging over $140,000 and comparable sales up by 10.7%. It is important to mention that the four-week comp number was positively impacted by approximately 1.4% due to the timing of the July 4 holiday.
- Regarding restaurant margins, the second quarter saw an increase to nearly $23,000 per store week. However, restaurant margin as a percentage of total sales decreased by 88 basis points to 15.7%. This decline was partly due to one-time adjustments that negatively impacted approximately 35 basis points on margins during the quarter.
- Food and beverage costs, as a percentage of total sales, were 34.5% for 2Q23, representing a 37bps increase YoY. The increase was mainly driven by 6% commodity inflation. While commodity costs have been in line with expectations for the first half of the year, it is now anticipated that full-year commodity inflation will be on the higher end of the initial guidance range of 5% to 6%, with approximately 75% of the overall basket already locked for Q3 and approximately 35% locked for Q4.
- Labor costs increased by 90bps to 33.6% last year. This was primarily due to wage and labor inflation of 7% and a 3.5% growth in hours. Labor growth was also negatively affected by a $2.7 million net impact from unfavorable claims experience related to group insurance and workers' comp, which included an additional $1.8 million in claims expense for this year and the overlapping of a $0.8 million favorable adjustment in the prior year. Although the level of labor inflation is expected to moderate as the year progresses, the first half of the year has seen slightly more wage pressure than originally anticipated. As a result, the full-year 2023 guidance for wage and other labor inflation has been updated to range between 6% and 7%.
- Other operating costs were 14.7% of sales, representing a 29bps decrease YoY. The year-over-year benefit of sales leverage was partially offset by a negative impact of a $1.6 million adjustment to the quarterly reserve for general liability insurance.
- G&A expenses increased by 3.6% year-over-year to 4.4%. The primary driver of the $1.8 million year-over-year increase was higher compensation expense. The effective tax rate for the quarter was 12.7%, and a full-year 2023 income tax rate of between 13% and 14% is now expected.
