News

Fiesta Restaurant Group brands stall in Q3

November 8, 2016

Fiesta Restaurant Group, Inc. reported relatively discouraging Q3 results, this week for the period ending on Oct. 2.

The parent company of the Pollo Tropical and Taco Cabana fast casual restaurant brands said in a news release that although it opened nine company-owned Pollo Tropical restaurants systemwide total revenues grew 5.9 percent to $182.3 million and most highlights showed a drop off in business, including:

• Pollo Tropical comparable restaurant sales down 1 percent, with comparable guest traffic down 2.5 percent, including impact of sales cannibalization that bumped comparable guest traffic down 1 percent.
• Taco Cabana comparable restaurant sales down 4.1 percent and comparable guest traffic down 3.5 percent.
• $4.5 million net loss or $0.17 per diluted share for Q3, compared to the prior year period of net income of $7.9 million, or $0.30 per diluted share, which includes asset impairment charges of $18.5 million for 10 closed Pollo Tropical restaurants and certain additional restaurants the company is still operating. 
• Adjusted net income decreased $0.8 million to $8.0 million, or $0.30 per diluted share, compared to the prior year period of adjusted net income of $8.8 million, or $0.33 per diluted share.

"The board and management team are committed to restoring momentum and building long-term shareholder value," said Fiesta Interim President and CEO Danny Meisenheimer in the release.

"We approach 2017 with optimism and a focused plan to deploy capital for new restaurant development in core markets, while we work to build brand awareness and frequency in our emerging Pollo Tropical markets and deliver exceptional brand fundamentals across both systems. We will continue our remodeling program at Pollo Tropical, primarily in south Florida, while we invest in keeping our restaurants competitive, and building strategic organizational systems and people capabilities."

The company said factors influencing the Q3 performance, include: 

• A 40 basis-point increase in restaurant wages and related expenses as a percentage of sales over the same period last year due to higher labor costs, including the impact of new company-owned restaurants and sales deleverage, which was partially offset by lower incentive-based compensation and medical expenses.
• A 220 basis point improvement in cost of sales as a percentage of restaurant sales improved 220 basis points compared to the prior year period due primarily to favorable chicken and other commodity costs and menu price increases.
• A 30 basis point increase in restaurant rent expense as a percentage of restaurant sales due to higher rent of new company-owned restaurants and sales deleverage.
• $0.3 million increase in general and administrative expenses to $14.5 million due to a $0.8 million charge for estimated costs and legal fees around settlement of a class action suit and a $0.6 million write-off of site development costs offset partly by lower incentive-based compensation.