The abrupt departure of Landry's (NYSE:LNY) CFO last month appears to have had little impact on the company's bottom line. The nation's second-largest seafood casual-dining chain -- trailing only Darden's (NYSE:DRI) Red Lobster -- posted a 28% jump in second-quarter earnings to $0.77 (or $21.8 million) from $0.60 the year before, on record revenues of $317.6 million.
Landry's second-quarter growth was earned without the benefit of either solid same-store sales increases or the addition of new restaurants. The operator of Joe's Crab Shack, Landry's Seafood, the Crab House, and Rainforest Cafe reported an overall 1.1% rise in comps and relatively modest expansion of only four new units. By contrast, Cheesecake Factory (NASDAQ:CAKE), IHOP (NYSE:IHP), Applebee's (NASDAQ:APPB), and Ruby Tuesday's (NYSE:RI) have all recently reported same-store sales increases in the mid-single digits, yet none delivered the EPS gains that Landry's has made commonplace recently.
Through the first six months, Landry's earnings have surged 33% on only an 8% rise in sales, thanks largely to margin expansion. Restaurant-level profit margins, which reflect labor and other core expenses, have risen 250 basis points to 19.8% from 17.3%. A few of the contributing factors that were cited include higher menu prices, increased productivity, and reduced advertising spending.
Second-quarter results would likely have been even stronger had inclement weather not played a role. Weather-related excuses have become increasingly popular, and so frequently used by management that I often tend to overlook them, but this one actually has merit. Landry's operates nearly one-fifth of its total restaurants within the Houston metropolitan area, and last month the city was deluged with more than 18 inches of rain, which caused rampant flooding.
Full-year earnings guidance has been revised, and Landry's is now projecting a tight range of between $2.12 and $2.14. This is up a dime from previous guidance and represents a 31% increase over the $1.63 earned last year. Assumptions baked into this forecast include flat same-store sales. If the company can actually wring out a positive number for this critical metric, then Landry's bottom line and stock price should both continue their upward climb.
Need more casual-dining coverage? These should satisfy your appetite:
- Applebee's Jab to the Ribs, by Rick Aristotle Munarriz
- Outback's Anemic Outlook, by Alyce Lomax
- Cheesecake Factory Satisfies, by Phil Wohl
- Eating Up the Diners, by W.D. Crotty
Fool contributor Nathan Slaughter owns none of the companies mentioned.
