Darden's
In the latest release of Landry's fiscal 2005 first-quarter results, it's evident that this enterprise has plenty of work filleted out for it. Revenues for its most recent period were $281.4 million, a minnow-sized increase of 2.1% compared with the same period a year ago. Same-store sales for the quarter didn't budge, remaining at the same level from last year's mark.
The company was able to make a marginal improvement to its operating margins. This time last year its operating profit margin was 7%, while in the most recent period it was able to increase it to 7.1%. Landry's attributed the slight improvement to lower bonuses and a decrease in Sarbanes-Oxley expenses.
While Landry's sales and operating margins were slightly higher, its net income declined. First-quarter net income was $7.4 million, compared with the $11.1 million earned a year ago. The company blamed its net interest expense, which increased 277% to $8.6 million. The dramatic increase is attributed to the company's $850 million refinancing in the fourth quarter of 2004.
Since weak sales and earnings will do little to fill the stomachs of hungry investors, perhaps the announcement of a $50 million share buyback program will hit the spot. But with $557.0 million in long-term debt, perhaps Landry's would be better off spending those funds to decrease its leverage reliance.
A greater concern for potential shareholders is Landry's sluggish sales. No matter how you slice it, it's tough to recommend any stock that is struggling to muster growth. Given that Landry's has extended its tentacles into a myriad of restaurant concepts, entertainment facilities, and now The Golden Nugget casino, it doesn't appear the company has a coherent plan to address this problem.
Until Landry's can establish a track record of substantially improved revenue and cash flow growth, investors might want to drop their fishing line elsewhere.
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Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.