Hungry for some earnings news, investor? Then climb on board Ark Restaurants
What analysts say:
Nada. Not a single analyst follows Ark Restaurants, and even history offers little guidance on what to expect. Last year, the fiscal second quarter was the weakest Ark experienced all year long. The year before, it was the company's strongest. And the year before that? The second weakest. Nor did Ark provide earnings guidance in last quarter's earnings report. The good news: Ark hasn't reported a quarterly loss since December 2002, so expect at least some profits.
What management says:
Commenting on fiscal Q1 2006 back in February, CEO Michael Weinstein praised the performance of Ark's restaurants in New York, DC, and Florida, but lamented that in Las Vegas, the results were "quite disappointing" (a theme that keeps recurring in Ark's recent quarterly reports). Unfortunately, Las Vegas locations account for more than half of Ark's total sales. As a result, overall sales for the company rose only 2.6% year over year, with same-store sales making up 2.3% of that; profits slipped 11% to $0.34 per diluted share.
What management does:
Ark's had a tough time of things lately. Although the company's gross margin remains firm at 60.7% -- far above the average for the restaurant industry -- its rolling operating and net margins are both down significantly over the last 18 months. They're also far below the 8.4% operating margin and 7.2% net margin that I cited when I last wrote about the company.
|
Margins % |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
60.7 |
61.1 |
61 |
60.8 |
60.7 |
60.7 |
|
Op. |
8.3 |
9.2 |
8.6 |
8.3 |
7.1 |
6.9 |
|
Net |
5.8 |
6.2 |
6.8 |
6.6 |
5.7 |
5.4 |
The Fool says:
Despite its troubles, however, Ark remains a quality company in a generally unappetizing industry. Ark's operating margin of 6.9% still exceeds the industry average by a full 100 basis points. And on the bottom line, Ark's diminished net margin of 5.4% keeps the company more than three times as profitable as the average restaurant chain. Despite its smaller size, which gives Ark fewer economies of scale, it remains in the same league as such larger competitors as Darden
Last quarter, Ark's revenues began rising again (year over year) for the first time in a year. If the company can keep the growth coming and start to leverage the kinds of economies of scale that benefit its larger restauranteur brethren, it could do well over time.
Competitors:
Ark's two primary competitors, Levy Restaurants and Restaurant Associates, are both owned by British restauranteur Compass Group, which also operates several New York franchises of embattled donut king Krispy Kreme
Fool contributor Rich Smith does not own shares of any company named above.
