News

Fiesta CEO looks for silver lining in dreary Q2 earnings

August 8, 2019

The financial news for Fiesta Restaurant Group Inc. hasn't been great this week.  

The parent company of fast casual brands Pollo Tropical and Taco Cabana reported Wednesday total revenues were down 3.1% for the quarter ended June 30. Things didn't get any better in separating the brands either. Compared to the same period last year, restaurant sales decreased 1.3% at Pollo Tropical and 3% at Taco Cabana, according to a company press release.

Fiesta President and CEO Richard Stockinger remained positive, however. Although sales declined, cannibalization was to blame. In fact, sales had been transferred from one restaurant to another, which actually increased the brand’s penetration and share, he said.

"As a whole, we believe this is another sign that our actions to date are positively impacting our guest experience," he added in the release.

He also pointed out that the brand is gearing up for sales growth via several initiatives, including menu innovation and simplification, value platforms, loyalty and e-club programs, refined catering menus and a DoorDash partnership. 

"These initiatives are in turn supported by digital, social media, traditional TV, and local marketing, which we are utilizing to accentuate our freshness attributes," he said. "Our intention for the balance of this year is to generate higher profitability and margins on a consolidated basis, excluding the recent lease accounting changes and non-cash write-off, as we leverage expected favorable commodity costs and prior-year investments."

Stockinger also noted the company had reduced outstanding borrowings under its revolving credit facility by $21 million in the quarter due primarily to a tax refund. 

"As a result, our outstanding revolving credit facility balance as of June 30, 2019, was $17 million lower than at the end of 2018," he said.

Q2 Highlights

• Total revenues decreased 3.1% to $171.4 million from $176.8 million in the second quarter of 2018.
• Comparable restaurant sales at Pollo Tropical decreased 1.3%.
• Comparable restaurant sales at Taco Cabana decreased 3%.
• Net loss of $43.4 million, or $1.62 per diluted share, which includes the unfavorable impact of $46.5 million, or $1.73 per diluted share, related to a non-cash impairment of goodwill, compared to net income of $9.5 million, or $0.35 per diluted share, in the second quarter of 2018.