Back on the Chain Chang's

It's time for P.F. Chang's (Nasdaq: PFCB  ) to take a breather as a growth stock. The operator of namesake bistros that specialize in Asian fusion dishes posted disappointing first-quarter results this morning and hosed down full-year guidance along the way.

The lackluster growth isn't a surprise. The company warned investors earlier this month that a drop in same-store sales had stung its top-line performance. True to its word, revenues inched just 16% higher as heady expansion was held back by a 2.5% dip in comps at its P.F. Chang's China Bistro chain.

Earnings climbed to $0.40 a share for the quarter, a respectable advance from the $0.36 the company earned a year earlier. However, the future isn't going to get a whole lot brighter. P.F. Chang's had originally projected comps to turn positive at its flagship concept during the second and third quarters of 2007. Now it sees negative same-store sales during every single quarter of the year. That's important, because the bistros account for 78% of the company's revenue mix.

That's the kind of bad news that usually trickles all the way down to the profit line. After originally expecting to earn $1.45 a share this year, P.F. Chang's is now guiding that bottom-line target down to $1.38 per share.  

The company's smaller Pei Wei concept is holding up considerably better, but it's barely profitable at this point. Future expansion will emphasize Pei Wei diners, and as a result, this will be the first year since 2001 in which fewer bistros open than the year before.

P.F. Chang's introduced a third concept back in October. However, it will be a long time before Taneko Japanese Tavern grows to where it has a financial impact.

I'm a fan of P.F. Chang's as a customer. I just don't see the urgency in hopping in as a shareholder. The company is trading at 30 times its freshly revealed forward guidance. That's a bit rich for a company whose key concept is stalling.

Sure, some of the faster-growing eateries, such as Granite City (Nasdaq: GCFB  ) and Kona Grill (Nasdaq: KONA  ) , aren't even profitable. Profitable speedsters like Chipotle (NYSE: CMG  ) and Buffalo Wild Wings (Nasdaq: BWLD  ) are trading at even higher multiples than P.F. Chang's, but those chains are earning their market premiums by producing stellar market-thumping results.

P.F. Chang's is in a bind. It has to fix its namesake brand or wait until its younger concepts are big enough to carry the load. I'll keep heading out to P.F. Chang's to eat. Heck, maybe my expanding gut will be enough to restore comps. However, my commitment ends after I pay the bill on the way out. Until P.F. Chang's regains its winning ways, shareholders are overpaying for their meals.        

Chipotle is a Rule Breakers recommendation. Buffalo Wild Wings is a popular Motley Fool hidden Gems selection. Belly up to the bar of either newsletter service with a 30-day free trial subscription. Yes, it seems that there really is a free lunch. 

Longtime Fool contributor Rick Munarriz is a fan of P.F. Chang's, but he knows that he can't eat enough to save it on its own. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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