There always seems to be restaurant news on the menu. As we do every week, let's take a look at some of this week's more appetizing stories.
1. Chip off the old Chipotle
Shares of Chipotle Mexican Grill (NYSE: CMG ) (NYSE: CMG-B ) soared 12% yesterday after the burrito roller posted better-than-expected quarterly results. Revenue climbed nearly 20%, but thinning margins led to a mere 3% uptick in earnings to $0.52 a share. It may not seem like much, but Wall Street was braced for a profit of just $0.49 a share, making this the first time in three quarters that Chipotle topped analyst targets.
Comps rose 3.5%. Sure, it was the result of menu hikes -- and not customer traffic -- but it's hard to fathom a company that draws heavily from the corporate lunch crowd to hold up well in this environment. Chipotle is clearly holding up better than most of its quick-service rivals.
2. That's just wild, Buffalo
Buffalo Wild Wings (Nasdaq: BWLD ) delivered even better results than Chipotle, with total revenue and net income climbing 33% and 29% respectively. The family-friendly sports bar chain with a knack for chicken wings is also sticking to its ambitious goals of serving up annualized earnings and revenue growth in the 20% to 25% range.
If that doesn't impress you in this crummy climate for restaurant stocks, nothing will. This is why I named Buffalo Wild Wings the one eatery stock to buy in 2009 two months ago.
3. And now the bad news
Enjoy the Chipotle and Buffalo Wild Wings reports. The rest of the week's earnings reports are harder to digest.
- Cheesecake Factory (Nasdaq: CAKE ) is posting lower revenue and earnings in the fourth quarter. The hub of bountiful portions and its Tolstoy-esque menu has had its bottom line slips before, but did you think we would see the day when the iconic Cheesecake Factory slumps on the top line, too?
- P.F. Chang's (Nasdaq: PFCB ) is scaling back its 2009 expansion plans, serving up an uninspiring quarterly report with comps falling sharply at both its namesake and Pei Wei concepts.
- As expected, Bob Evans (Nasdaq: BOBE ) posted a charge-laden loss in its fiscal third quarter. The company would have turned a profit if it wasn't for a goodwill impairment hit on its Mimi's Cafe chain, but revenue still fell during the period.
4. Making dough rise
Okay, let's close with some better news. BJ's Restaurants (Nasdaq: BJRI ) was trading as much as 18% higher this morning after posting relatively healthy results. The casual-dining chain that specializes in eclectic beer and pizzas came through with a 17% spike in revenue during the fourth quarter. It posted an adjusted profit of $0.13 a share, well ahead of the market's $0.10 a share target.
Comps fell 0.7% during the quarter, so BJ's isn't necessarily holding up as well as Chipotle and Buffalo Wild Wings on that front. However, drumming up just 0.7% fewer sales at the individual unit level -- after a 4.9% increase in comps a year earlier -- is still impressive in this environment.
So, what's working in this space? Chipotle's premium burritos prove that you don't need a Dollar Menu to succeed in quick-service. Buffalo Wild Wings shows that a throwback sports bar concept with kid menus, a ton of televisions, and brisk carryout business can succeed if it's run well. BJ's is a beacon in the otherwise moribund casual-dining niche.
These three stocks may not be recession-resistant. They will obviously feel the pain if the industry continues to get slammed. The key here is that the worse the economy gets, the more likely that weaker rivals will get zapped. It will make already solid companies great investments when the economy does bounce back.
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