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We caught up with CFO Mark Robinow for lunch today.  The obvious first issue on the table was the departure the CEO Mark Buehler.  Robinow was very straight forward in saying that the Buehler and the board decided that the company need to find a CEO that would reside in Phoenix.  Importantly, it had nothing to do with the operations; in fact, according to Robinow, the company is operationally stronger that it was 18 months ago. 

A couple of other key takeaways from lunch:

  1. Business trends remain on track - the Kona recovery story is alive and well.
  2. The remodel program is probably ahead of plan and we should see a positive impact to 4Q comps.  The remodeling of the seven stores should be completed in time for the holiday season.
  3. Commodity costs remain an issue, as for all restaurant companies, but the overriding message was that costs are manageable.
  4. From a growth perspective, the company is currently negotiating leases for 2012 and 2012.
  5. Management is looking to close under-performing stores.

Despite the recent price action in the stock (before today), I continue to see KONA as one of the better-positioned small cap names in the restaurant space.


Howard Penney

Managing Director