Like one of its signature sandwiches, there's a lot more to Cosi's
Yes, revenues climbed 11.3% to hit $31.8 million, but operating costs grew at an even headier clip. The company posted a loss of $0.12 a share, narrower than last year's $0.16-per-share showing; it would have been wider if you backed out a chunky provision for asset impairments and disposals that Cosi recorded a year earlier.
However, there are a few signs that Cosi is finally starting to get it right. The company hasn't turned a profit since going public in 2002, yet this quarter the baked-goods eatery posted positive operating cash flow for the first time. The company also opened 27 new locations in 2006, shedding just five shuttered stores along the way.
An emphasis on franchised locations will help Cosi grow its store count even faster in the near term. It's looking to add 14 new company-owned units in 2007, along with 45 to 55 franchised locations.
The company's franchising pipeline is thick. There are commitments for 379 new restaurants (including this year's projected openings) from 33 area developers. That's a bright spot on the horizon for a company with just 130 Cosi units in operation today. Cosi probably owes its popularity on the franchising front to its deal with Macy's. The Federated Department Stores
Cosi will never be Panera Bread
But let's cut Cosi some slack here. It still sports a cash-rich balance sheet. Comps held steady last year. With more high-margin franchise revenue on the way, with any luck we're now just quarters away from Cosi's first profitable showing. It's had plenty of years to learn how to serve bread. Now let's see it earn some.
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Longtime Fool contributor Rick Munarriz started out covering food and restaurant stocks for the Fool in 1995. He had lunch at that crowded Panera yesterday, incidentally. He does not own shares in any company mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.