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On a relative basis, 3Q09 was not a bad quarter for CPKI with same-store sales down 8%, which came in only 0.5% below management’s initial guidance.   During the quarter, price was up 2.6% and traffic was down 10.6%.  Management’s comment about current trends that “easy comparisons have yet to restore momentum to the industry” was interesting and only reinforces my belief that Q4 estimates across the industry are relying too much on a sales recovery based on easy comparisons.  California continues to be a problem for CPKI.

The company reported $0.24 per share, in line with October guidance.  CPKI reported that total revenue declined 5.3%.  Lower food costs (offset by higher labor costs), lower pre-opening costs and a lower tax rate enabled CPKI to grow net income by 17% and EPS by 20%.

CPKI’s off-premise sales had grown to 18% of restaurant sales, of which takeout was 14% and delivery was 4%.  In 3Q09, however, off-premise sales fell to 16% as delivery declined to 2%.  Part of the decline can be attributed to high unemployment and office vacancy rates in California.  Food service comps for the third quarter were only down 7% and off-premise contributed a negative 1%. 

On a monthly basis, July same-store sales declined 9% (-1.3% last year), August was down 7.2% (-2.2% last year) and September was down 7.3% (-4% last year).  System wide, CPK restaurants delivered AWS of $60,945, down 8.7% year-over-year.

Kraft royalties were up 35.2% in the quarter and management expects Kraft to spend a significant amount promoting the CPK brand this year.   CPKI is working cooperatively with Kraft on several initiatives to increase brand awareness for both its frozen product line and full service restaurants. 

According to management, real estate opportunities in 2010 are among the best it has seen in years.  Available space is providing attractive locations and terms.  CPKI is targeting 8 new locations in 2010; all outside California.

Some new Initiatives in the restaurant to help fight declining sales trends:

  • New fall menu with 8 new items and no price increase
  • additions are “value orientated”
  • Sales productivity report to help increase check averages by “Suggestive” at-table strategy… (I would find this annoying!)
  • Call center for takeout. More efficient and allows for better results. Supplements online ordering at cpk.com

4Q09 GUIDANCE - 4Q09 EPS guidance of $0.16 to $0.18 assumes a same-store sales decline of -5.5% to -6.5%.  For the month of October, same-store sales were down 6.1% versus 7.3% last year.  We can add CPKI to the list of casual dining companies that is seeing sequentially better trends in October.