Investors must have been eagerly awaiting fourth-quarter results from Famous Dave's
Unfortunately, the dining chain, which specializes in mouth-watering barbecue, failed to satisfy its shareholders they way it does its hungry patrons. Earnings fell 20% from a year ago to $0.08 per share, wiping out the stock's gains.
Pulling the meat from the bone on the financials, opening new restaurants was the primary reason for the fall. While adding three new restaurants during the quarter helped revenue increase 12.3%, operating inefficiencies from the new franchises, coupled with an enormous 331% increase in pre-opening costs, ate away at Famous Dave's bottom line.
Although company-owned restaurants posted a healthy 3.3% rise in comps, management pointed out concern for franchised same-store sales, which declined 6.8% during the quarter, because of some weak regional economies and a longer-than-average honeymoon period at new restaurants. The satisfying success of Famous Dave's restaurants offers promise that management will deliver a juicy rebound, but I am concerned that earnings will continue to struggle until we finally see a rebound in same-store sales. With 20 to 25 new restaurants planned for this year -- more than last year's 19 openings -- I wouldn't expect reaching double-digit revenue growth to be a problem.
Famous Dave's trades at a small discount to competitors like Buffalo Wild Wings
Fool contributor Jason Ramage owns shares of Buffalo Wild Wings and is careful not to spill that barbecue sauce on the Fool's disclosure policy. Buffalo Wild Wings is a Motley Fool Hidden Gems selection, and the Fool owns shares of it.