BJRI: STRONG QUARTER BUT PRICED TO PERFECTION

BJ’s posted in line results but, at this multiple, the BJRI growth model is priced to perfection.

BJRI comps beat consensus at +6.9% versus +5.3%.  In our preview note we had highlighted the sequential strength of California Sales Tax Receipts and strong intra-quarter to date Knapp Track trends as supportive of BJRI posting a strong comp this quarter.  Costs were effectively managed during the quarter thanks largely to strong same-store sales growth.

In terms of outlook, the company is lapping more difficult compares in the back half of the year from a comp perspective.  In addition, the amount of price that the company is currently planning on taking through the third and fourth quarters is 2% versus the 3% plus during the first half of the year.  Importantly, 80% of the company’s food costs are locked and COGS as a percentage of sales are expected to be 25%, roughly, for the remainder of 2011.

In terms of new unit openings, the company is opening as many as four new restaurants in Q3, one of which is open already in Texas.  Additionally three to four openings are anticipated in Q4.   Restaurant opening costs are expected to be $500k per unit.  The company remains focused on growth, rather than dividends or any other use of cash.

The company faces a much tougher compare in the third quarter from both a same-restaurant sales and margin perspective.  At 17x EV/EBITDA, expectations are high.

BJRI: STRONG QUARTER BUT PRICED TO PERFECTION - BJRI pod 1

BJRI: STRONG QUARTER BUT PRICED TO PERFECTION - bjri quad

Howard Penney

Managing Director

Rory Green

Analyst