Einstein Noah Restaurant Group Inc. has reported the financial results for its concepts operating under the Einstein Bros. Bagels, Noah's New York Bagels, and Manhattan Bagel brands for the first quarter ended March 30, 2010.
For the quarter, systemwide same-store sales turned slightly positive to 0.1 percent for the first time in five quarters. Company-owned restaurant sales similarly grew modestly, as the company benefitted from a net increase of five additional company-owned restaurants since March 31, 2009. Company-owned comps were down 0.2 percent, but showed a sequential improvement from the 1.7 percent decrease reported in the fourth quarter of 2009.
Total revenues rose slightly to $100.8 million compared to $100.4 million in the first quarter of 2009.
Adjusted net income increased to $1.5 million, or $0.09 in adjusted EPS on a dilutive basis, in the first quarter of 2010, compared to $1.2 million, or $0.07 in adjusted EPS on a dilutive basis, in the first quarter of 2009.
"Our first quarter performance underscores our successful execution of key sales and cost control strategies, and builds on our strong foundation of long-term growth opportunities," said Jeff O'Neill, Einstein Noah's president and CEO, in the company's earnings release. "For the quarter, product innovation and creative promotions drove improvement in system-wide comparable sales and transactions, and we were pleased that consumers responded positively to our check-building efforts despite intensifying competition in the breakfast daypart."
"Our cash flow generation is enabling us to meet or exceed our financial obligations, and is a major contributor to a strong and flexible capital structure. We intend to stay focused on this metric as we move toward a more asset light business model, characterized by accelerated franchise and licensing development and limited company expansion."
Marketing initiatives increased $1.5 million compared to the prior-year period, as the company launched its marketing investments last year in mid-February, whereas in the first quarter of 2010, increased marketing efforts were incurred over the entire three-month period.
Restaurant openings during the first quarter of 2010 consisted of 10 outlets, including three Einstein Bros. company-owned restaurants, one Manhattan Bagel and one Einstein Bros. franchise restaurants, and five Einstein Bros. licensed restaurants. One company-owned restaurant and one licensed restaurant also were closed during the period.
The company also benefitted from a net increase of eight franchise restaurants and 25 licensed restaurants since March 31, 2009. The effect of the new locations helped drive franchise and license related revenues up 16.7 percent to $2.2 million in the first quarter of 2010, up from $1.8 million in the first quarter of 2009.
2010 outlook
The company anticipates the opening of 10-12 new company-owned restaurants, 12-16 new franchised restaurants, and 35-45 licensed restaurants.
The company currently has 15 signed development agreements for Einstein Bros. Bagels franchises. This coupled with the efforts to sign additional development agreements in 2010 is expected to yield an ending pipeline of 90-100 additional franchise locations.
Through the end of the quarter, the company has secured contract pricing on approximately 53 percent of all major agricultural commodities for the remainder of 2010, which should result in favorable prices compared to 2009, along with an opportunity to benefit from further reductions in the market.
