January sales were 10 to 15 points better than December as restrictions subsided.
As J. Alexander’s continues to review strategic alternatives, the brand experienced notable improvement in the new year as it captured just under 75 percent of January 2020 sales and nearly 78 percent of January 2019 sales.
The brand noted that this year's January sales would’ve been two to three points higher, but it was impacted by the fact that it didn’t include the week of New Year’s Eve, unlike the past two years. The performance represented a 10 to 15 percent point increase from December.
The favorable trend is good news after a tough quarter in which the full-service concept battled through rising COVID cases and intense dining restrictions. In October and November, the brand brought in 90 and 80 percent of prior year sales, respectively. In December, sales were slightly higher than 80 percent of last year sales, but that was due to the additional week in the calendar. When excluding that extra December week, J. Alexander’s replaced only 65 percent of sales.
While J. Alexander’s navigates the hectic environment, it’s still evaluating strategic alternatives, a process it initiated in 2019. At the time, the chain mentioned multiple pathways, including a merger or sale, a strategic investment accompanied by a significant share repurchase, or the acquisition of complementary concepts to increase the revenue base and operating leverage. The brand retained investment banking firm Piper Sandler to facilitate the review.
Several months later, J. Alexander’s said its board believed its small size makes for an inefficient standalone publicly traded company. Piper Sandler contacted more than 125 potential buyers, and three emerged as serious candidates. One of the potential buyers offered “a premium to the then-current market price,” but that changed once the COVID pandemic hit. The company reduced the proposed purchase price multiple times and insisted on conditions relating to J. Alexander’s performance. As a result, J. Alexander’s shelved talks and chose to instead focus on rebuilding sales.
Lonnie J. Stout, executive chairman of the board of directors, said the brand will “pursue completing that process prudently this year” as stores move toward full capacity and sales reflect the brand’s true potential.
“We are heartened by the strength and resilience of our business and appreciate the efforts of our team members and the loyalty of our guests during these challenging times,” Stout said in a statement. “Our Board and management team remain committed to completing our previously announced review of strategic alternatives.”
The company doesn’t intend to provide periodic updates on the status of the evaluation process until further disclosure becomes necessary.
As of February 7, J. Alexander’s was operating at roughly 60 percent capacity across its 46 stores. The company expects capacity to increase throughout February as jurisdictions continue to ease restrictions. Company-wide off-premises sales averaged $850,000 per week in the final month of fiscal 2020. For comparison, J. Alexander’s averaged between $600,000 and $700,000 in off-premises each week in the quarter ending September 27.
J. Alexander’s estimated that excluding the impact of a $10 million voluntary repayment of outstanding debt in October, it generated $370,000 per week in positive cash flow in Q4. When factoring in the $10 million repayment, the company estimated a weekly cash burn rate of $344,000 per week. As of February 7, the company’s cash on hand totaled approximately $11.5 million.
“The company continues to believe that, at current business levels, it will have adequate liquidity for fiscal 2021 from cash on hand and available borrowings,” the brand said in a statement.
The chain is scheduled to open its first ground-up build of a Redlands Grill restaurant on March 29 in San Antonio, and also debut a new J. Alexander’s store in Madison, Alabama, in Q4 of 2021.