Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BJ's Restaurants Inc (BJRI, Financial) reported a 13% growth in adjusted EBITDA over the same period last year.
- Total sales for the quarter were $349.9 million, with 107 restaurants breaking daily or weekly sales records.
- Restaurant margins expanded to 15.5%, a 100 basis point increase from the prior year.
- The company successfully rolled out the second phase of its gracious hospitality people initiative, improving service and operational efficiency.
- BJ's Restaurants Inc (BJRI) completed 19 remodels year to date, with plans to remodel five more by the end of the year, enhancing the dining experience and driving sales.
Negative Points
- Comparable restaurant sales decreased by 0.6% for the quarter.
- Food cost inflation, particularly in bone-in chicken wings and avocados, negatively impacted margins.
- Labor and benefits expenses were impacted by onetime costs related to training and extra scheduled labor, affecting margins by approximately 20 basis points.
- The company anticipates a higher level of marketing investment in Q3, which will increase costs by approximately 50 to 70 basis points compared to Q3 of 2023.
- BJ's Restaurants Inc (BJRI) faces challenges from external factors such as political conventions and the Olympics, which can negatively impact dining out trends.
Q & A Highlights
Q: Can you talk more about what you experienced through the May and June holidays, both in terms of consumer demand and the steadiness of that special occasion and dining piece? And then, also just your experience driving throughput?
A: We saw improving trends throughout the quarter, particularly around holidays like Mother's Day, Father's Day, and graduations, which drove significant traffic and average check increases. Regarding throughput, we are in the early stages of our new service model, which aims to get servers to guests sooner, improving the overall dining experience and table turnover.
Q: Are there any dynamics with the calendar shift like July 4 holiday, and potential dynamics at play with the Olympics and conventions?
A: The calendar shift, including July 4 moving to a Friday and the impact of hurricanes, has been challenging. Political conventions and the Olympics also tend to affect dining out patterns. However, underlying consumer behavior remains consistent with previous quarters.
Q: How do you view the outlook for the rest of the quarter given the broader industry trends and increased value offers from peers?
A: California saw a pullback in April due to minimum wage increases and tax return deadlines, but trends are improving. We are increasing our marketing spend to ensure our voice is heard amidst the competitive landscape, focusing on driving traffic and leveraging sales.
Q: Can you elaborate on your expectations for Q3 and Q4 same-store sales and pricing?
A: We expect Q3 comp sales in the 1% to 2% range, with a modest pricing round of about 90 basis points in late September. For Q4, we anticipate mid-2% pricing, balancing out the marketing investments made in Q3.
Q: What are your thoughts on unit growth for 2025 and beyond?
A: We aim to gradually increase unit growth, starting with five new restaurants and scaling up. Our focus is on quality and ensuring strong returns from new prototypes. We will provide more detailed plans after our Board review in October.
Q: Can you discuss the labor environment and any impacts from the California Fast Act?
A: We have not seen significant changes in turnover rates or wages due to the California Fast Act. Our retention rates are better than in 2019, and wage inflation remains in the 3% to 4% range. The labor pool quality has improved, and we are retaining team members longer.
Q: How are you managing the increased marketing spend and its impact on margins?
A: The increased marketing spend is part of our strategy to drive traffic and brand awareness, particularly around our Pizookie Pass. We are focusing on digital and connected TV channels, with some expansion into new markets. The messaging will emphasize value and price points to attract consumers.
Q: Can you provide more details on the throughput initiative and its expected impact on table turns?
A: Our goal is to reduce overall dining time, particularly during peak periods, by improving server efficiency and kitchen operations. We are implementing pay-at-the-table options and optimizing our kitchen display system to enhance productivity and guest experience.
Q: What are the main drivers behind the recent cost of goods inflation?
A: The primary drivers are increases in the cost of bone-in chicken wings and avocados. We have contracts for many of our food items, but certain produce and raw materials are subject to market fluctuations.
Q: How are you planning to manage the manager pipeline in preparation for growth acceleration?
A: Building the manager pipeline typically requires a 12-month lead time, especially for new or satellite markets. We are focusing on ensuring we have the right quality and training in place to support our growth plans.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
