Where have all the hungry patrons gone, P.F. Chang's (NASDAQ:PFCB)?
Shares of the Asian-fusion restaurant chain fell nearly 6% yesterday after posting lackluster top-line results for the March quarter. The company will post complete first-quarter results later this month, but it did disclose that revenues rose 16% for the period.
That doesn't sound too bad, right? Wall Street was only expecting a 17% spike. You won't find too many mature chains growing at a 16% clip in this dicey environment, with bad weather crimping traffic and wage hikes testing consumers' ability to absorb menu-price increases.
Unfortunately, P.F. Chang's higher revenue exclusively stems from its aggressive expansion strategy. Comps fell by 2.5% at its namesake chain, even with a menu commanding prices nearly 3% higher today than they were a year ago. Its smaller Pei Wei concept held up better, with an 0.5% increase at the individual unit level. However, it also inched its menu prices 2% to 3% higher, indicating that overall traffic probably dipped during the quarter there, too.
P.F. Chang's knows the drill. If it can't play a hot hand, it can at least play one that's less cold. Its expansion strategy called for the opening of just one P.F. Chang's Asian Bistro eatery during the quarter, while erecting 10 Pei Wei diners. This will likely be the first year since 2001 in which the company opens fewer P.F. Chang's Asian Bistro units than it did the year before.
This doesn't mean the concept is broken. Casual-dining bellwethers like Brinker (NYSE:EAT) and Applebee's (NASDAQ:APPB) also produced soft comps earlier this year. Is it the weather? Is it the economy? Is it the overcrowding ramifications of an industry that has spent the past few years overbuilding? Probably a little bit of everything.
Even the dependable Cheesecake Factory (NASDAQ:CAKE) has stumbled lately, after posting positive quarterly comps throughout the 1990s. BJ's Restaurants (NASDAQ:BJRI), IHOP (NYSE:IHP), and Chipotle (NYSE:CMG) are all working on store-level winning streaks, but we'll let the next few weeks dictate whether those eateries are strong enough to weather this tumultuous storm.
This doesn't mean we should excuse P.F. Chang's recent shortcomings, but it could explain why "dim sum" may be better left for its menu than its prognosis.
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Longtime Fool contributor Rick Munarriz has enjoyed his meals at his local P.F. Chang's. He owns shares in Cheesecake Factory. 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.
