Not every casual dining chain struggled in the latest quarter.
Yes, positive comps. Brinker
Kona's performance wasn't perfect. Even though revenue soared 54% to $15.7 million on the heels of healthy expansion, the company did post a loss of $0.09 per share for the period. That was expected. Even though the company may achieve a small profit in the current quarter, Kona doesn't expect to turn a profit this year.
Crowds kept coming, but operating margins got squeezed during the period. Higher labor costs after the national minimum wage hike, higher produce and seafood prices, and inefficiencies in recently opened eateries ate into the healthy top-line take.
Kona Grill's allure lies in catching a hot concept in its infancy. The company runs just 16 high-volume restaurants, six of which opened over the past year. Four more units will open later this year.
Clearly, there's a lot of real estate left to conquer. The company will generate between $73 million and $75 million in revenue this year. The loss will clock in between $0.08 per share and $0.29 per share. Most analysts expect the company to turn a profit come 2008, though some feel that shift won't come until 2009.
That's OK. This isn't an earnings-growth story at this point. Opening new units isn't for the thrifty. It also takes time for efficiencies to improve, and for a concept to scale. Kona also has a market to educate along the way, given its somewhat unique theme. It relies on sushi to drive 22% of its unit sales, but this isn't an Asian chain like Benihana
Not every casual dining chain has struggled -- but then, Kona Grill isn't exactly like every other casual dining chain.
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Longtime Fool contributor Rick Munarriz has been to Kona a few times, but never to a Kona Grill (which you won't find in Kona, by the way). He does not own shares in any of the companies 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.