O'Charley's shares drop following 2Q report

Shares of O'Charley's Inc. dropped after the casual dining chain reported a wider loss and slashed its 2008 profit guidance.

The stock dropped 53 cents, or 4.6 percent, to close at $10.95. Earlier in the day, the stock was down nearly 16 percent.

For the second quarter ended July 13, O'Charley's posted a loss of $7.8 million, or 38 cents per share, compared with a loss of $1.1 million, or 5 cents per share, in the prior year quarter.

The loss included 6 cents per share in asset impairment charges, 7 cents per share in expenses related to remodeling its restaurants and a hefty tax expense. The company had to reverse all of the tax benefit it received in the first quarter, resulting in a tax expense of $5.6 million,or 26 cents per share.

Analysts polled by Thomson Financial expected a loss of 5 cents per share.

Revenue fell 3 percent to $221.1 million from $228.8 million in the second quarter of 2007. Analysts predicted revenue of $220.5 million.

Same-store sales, or sales at stores open at least a year, fell 1.4 percent at O'Charley's company-owned restaurants, dipped 3.1 percent at Ninety Nine Restaurants and dropped 6.4 percent at Stoney River Legendary Steaks.

Wachovia Capital Markets analyst Jeff Omohundro said he was "somewhat encouraged" by the improvement in same-store sales at the O'Charley's brand.

In the first quarter, same-store sales fell 4.7 percent at O'Charley's.

The company has been attempting to re-energize its brand by remodeling its restaurants to appeal to higher-income diners.

But with sales declining, O'Charley's said it will defer the rest of its remodels that were scheduled for the remainder of 2008 to focus on "driving sales at all restaurants and improving the company's profitability."

O'Charley's also cut its 2008 profit guidance to between 8 cents and 16 cents per share. The company previously expected profit between 18 and 28 cents per share. Analysts anticipate profit of 22 cents per share.

The company said the new guidance includes a tax benefit between 12 cents and 17 cents per share and remodeling expenses of 26 cents per share.