It's been some time since we've looked at casual diner Steak 'n Shake
Why the shares ticked lower this morning is anyone's guess -- if anyone cares. More interesting is the discussion of the company's results, which looked pretty good. Revenues were up 8.7% for the year to nearly half a billion, while same-store sales rose 4.9%. Net income was up 5.2% for the fiscal year. And yes, this performance has earned investors a nice run these past 12 months.
What may disappoint investors is the nagging realization that while the company is performing well -- it reported a litany of store-level and other factors, from improved service to lower management turnover, that it believes are driving results -- this is simply not a high-growth story and hasn't been for a while. Heck, Steak 'n Shake plans to close nine underperforming stores and, when done, won't be much bigger than it was at the end of FY 2002.
Yet, far from out of ideas, management articulated its growth strategy back in February, highlighting nitty-gritty initiatives as simple as accepting credit cards. The strategy, significant for a company that usually gets well under $10 per customer, could particularly benefit the carryout business, which makes up a substantial portion of sales. (And yes -- there are plans to add more restaurants in FY 2004.)
Steak 'n Shake expects earnings of approximately $1 per share in fiscal 2004, representing 11% growth. At around 17 times projected earnings, the stock seems pricey at the moment -- but perhaps not by much. Especially for a company with a sensible expansion strategy, solid balance sheet, a strong niche between fast food/fast casual and sit-down casual, and a management team focused on quality growth.