Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Good Times Restaurants Inc (GTIM, Financial) reported a same-store sales growth of 5.8% for Good Times and 1.2% for Bad Daddy's, indicating positive sales momentum.
- The company successfully launched new menu items, such as the Classic Smash and Steakhouse Smash burgers, which have been well-received and are expected to become permanent menu items.
- The Madison, Alabama restaurant continues to perform well, ranking in the top quartile for sales performance.
- The company completed successful remodels of certain locations, leading to significant sales turnarounds, such as the Good Times in Lakewood, Colorado.
- Good Times Restaurants Inc (GTIM) repurchased shares under its share repurchase program, indicating confidence in the company's valuation and future prospects.
Negative Points
- Labor costs remain a challenge, with ongoing wage and salary pressures requiring higher starting wages to attract skilled employees.
- The company faces elevated costs in its commodity basket, particularly with wholesale ground beef prices reaching all-time highs.
- Some restaurants in the portfolio continue to underperform, leading to potential closures of low-performing locations.
- The company is experiencing slower-than-desired growth in member activity for its loyalty program, particularly in drive-through concepts.
- Increased competition and promotional activity from competitors have impacted same-store sales performance, particularly with the prevalence of $5 value meals.
Q & A Highlights
Q: With rising beef prices, do you expect to raise menu prices to offset these costs at both concepts?
A: Ryan Zink, CEO, explained that while beef prices are high, they are not planning an immediate price increase. They are targeting the end of fiscal Q1 for the next price increase, considering the dynamic environment and potential long-term elevation in beef costs.
Q: What was the advertising expense for the quarter, and will it remain the same in Q4?
A: Keri August, SVP of Finance, stated that advertising expense was 2% of revenues, totaling $749,000. Ryan Zink added that Q4 will likely see similar advertising expenses, with Q1 typically being higher due to gift card promotions.
Q: What is your best guess for store-level margins in the current quarter compared to the last quarter?
A: Ryan Zink noted that Q3 typically has the highest sales volumes, so there might be some sales deleverage in Q4. He expects a slight elevation in cost of sales and labor, with other costs remaining similar.
Q: Can you provide an update on the development pipeline?
A: Ryan Zink mentioned they are finalizing a lease in the Greater Charlotte area, aiming for an opening in late fiscal Q2 or early Q3 of 2025. They plan to open one new location every 12 months, focusing on reinvesting in existing restaurants.
Q: Are some of the lowest-performing stores currently unprofitable, and are they detracting from profitability?
A: Ryan Zink confirmed that the stores considered for closure are negative contributors to restaurant-level cash flow. Closing these stores would ultimately be income accretive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
