California Pizza Kitchen
California Pizza disclosed that fourth-quarter revenue jumped 16.4% year over year to $146 million, while comparable restaurant sales increased 6.9%, versus a 5.3% rise in 2005's fourth quarter. The robust growth prompted California Pizza to bump up its per-share earnings expectations for the quarter to $0.15-$0.17 from a previous range of $0.13-$0.15.
The EPS boost, though, has to be examined in context. The new range is still well below the company's original projection calling for EPS between $0.25 and $0.27. When California Pizza lowered its forecast in November, it cited delays in developing its new restaurants, including permitting and construction snafus, as the primary culprit for the reduction.
California Pizza added a slew of new locations in the fourth quarter, 11 sites in all, including nine full-service restaurants and two quick-service CPK/ASAP venues. By comparison, in last year's fourth quarter, the firm opened just four restaurants. Notably, development-related issues appear to be becoming a perennial problem for the firm. In the fourth quarter of 2005, California Pizza blamed below-expected earnings in part on remodeling initiatives.
On the positive side, California Pizza's heady comparable-restaurant sales growth provides strong evidence that the company's concept resonates with diners. It also provides differentiation against pizza delivery competitors such as Papa John's
Unfortunately, given the firm's track record with development, it could run into problems again in 2007. California Pizza may open as many as 26 restaurants this year.
Of course, it's possible that California Pizza has learned from past setbacks, and has gotten better at managing expansion. Even so, it might be best to take a wait-and-see approach.
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