I usually judge a company's financials impartially, but I just can't be dispassionate about Steak n Shake (NYSE: SNS ) . That's not just because it's a small company trying to make good in a big burger world; I really dig its food, too. The fries are crispy, the shakes are thick and cold, and the burgers have just the right amount of grease for a late night artery-clogging experience. Heck, I'm thinking about heading over there right now.
The streak continues, unfortunately
That's why it pains me to report the company just reported its seventh consecutive quarter of negative comparable-store sales -- down 4.7% in the fiscal second quarter, to be exact. I'm not sure what to make of this unenviable streak. Until Q4 2005, the company had 10 straight quarters of higher comps.
The company's press release blames adverse weather, rising gas prices, higher interest rates, and other "regional economic factors." It seems hardship comes in bunches when the steakburgers aren't flying out the door.
Soft sales led to a myriad of earnings stumbles, including a margin decline of 30 basis points. Operating expenses rose 140 basis points, with the increase pretty evenly mixed at both store and administrative levels. EPS slid to $0.21 a stub, compared to $0.30 last year.
To make it a clean sweep, the company lowered full-year earnings guidance by more than 30%. Needless to say, investors promptly took an 11% bite out of the company's share price. Not a pretty sight.
Tasting, but not buying
While I remain a loyal customer, I'm not buying Steak n Shake's sales excuses. The big three burger joints -- McDonald's (NYSE: MCD ) , Burger King (NYSE: BKC ) , and Wendy's (NYSE: WEN ) -- all reported positive U.S. comps in their most recent quarter. You can argue that Steak 'n Shake is more like Red Robin (Nasdaq: RRGB ) , which hasn't yet reported this quarter, but that company had slightly positive comps during the fall quarter.
Flip fewer employees, more burgers
I'd like to report to Foolish investors that better times lie ahead, but there's no evidence to support this. The CAPS community is neutral to negative on the stock, even as many confess that they're somewhat addicted to the food. "The truth is that as much as I like the food," one player admits, "the last four experiences ... have been absolutely terrible."
The recently published annual report touts a reduction in employee turnover last year. While this is important in the restaurant business, Steak n Shake needs to increase its burger turnover, even as it retains employees. Right now, it's facing seven down quarters and counting.
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Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, but doesn't own shares of any companies mentioned in this article. The Fool has a disclosure policy.
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