Following strong third-quarter results, BJ's Restaurant and Brewhouse's
Net revenues and earnings-per-share for the quarter increased 30% and 66.7%, respectively. Comparable same-store sales were also solid, rising 5.3% versus the year-ago period. Unit growth for the year also met company expectations, adding an additional nine restaurant sites -- or 25% year-over-year growth.
Operating margins also improved slightly, but management believes there is plenty of opportunity for improvement. To help sustain profitability through a rising utility cost environment, the company raised prices just over 1% in 2005, and will likely make some additional increases in 2006. In addition, new menu enhancements like bolder sauces and increased bread selection will give the company added pricing power.
In the conference call, CEO Jerry Deitchle expressed excitement over the company's performance, stating, "Sales and operating profits continue to perform pretty darn well."
When he took over the helm a year ago, he saw a "good little restaurant company" with the potential of becoming a "restaurant growth company." Here we can plug in any number of well-known franchises for examples of the type of company BJ's is capable of becoming: Applebee's
With only 45 sites in place, the company intends to grow by another 11 units, or roughly 25% in 2006. It does not yet have the distribution structure in place outside of California, so it will continue maximizing its leverage within the state, where it plans to open five more restaurants. Management sees room for at least 15 to 20 more units in California alone.
There is plenty to like with what's brewing in BJ's land. Prospective investors will want to monitor the company's dilution -- it was over 13% in 2005 -- but even this is a minor quibble given the needs of the company to expand aggressively. If you're looking for a potential long-term growth opportunity still in its infancy, BJ's should be considered on the short list of candidates.
Bite into more restaurant Foolishness:
McCormick & Schmick's
(NASDAQ:MSSR)hooks a solid fourth quarter.
- Nothing but delicious results continued to be served from Cheesecake Factory
- And Brinker
(NYSE:EAT)didn't upset the market's stomach after all.
Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.