The brand is close to reaching prior year sales levels.
J. Alexander’s, a brand once seeking a sale, determined a few months ago that it wouldn’t get an offer that reflected the long-term value of the brand until the uncertainties of COVID were resolved and business returned to satisfactory levels.
And with each passing week, those “satisfactory levels” that the brand referred to are coming back faster than anticipated. The chain announced Thursday that it’s reached approximately 90 percent of prior year sales through the first three weeks of September. The brand’s other major concept, Stoney River Steakhouse and Grill, reached 89 percent of sales in the same period.
These benchmarks have been achieved with 46 locations averaging about 57 percent of total seating availability. Total weekly off-premises sales have remained in the $600,000-$700,000 range for the past 10 weeks even with all dining rooms being open since early June. In July, off-premises accounted for 20 percent of sales.
CEO Mark Parkey said that sales trends, improving margins, and ability to retain off-premises volumes as dining rooms ram up show that “the worst of the storm has passed.”
“As we’ve shared in previous communications, there will be winners and losers when the pandemic is over and our goal from the very beginning has been to be one of the winners,” Parkey said in a statement. “The consistent improvement in our top line sales since all of our dining rooms were allowed to begin reopening in June, combined with the efficiency of those sales as reflected in improved restaurant operating margins over the past few months, lead me to conclude that we are well-positioned to achieve our goal and to do so sooner than we had originally envisioned.”
The brand’s recent results are a significant climb compared to when the pandemic first arrived. J. Alexander’s same-store sales plummeted 81 percent in April and 61.5 percent in May, but improved to down 25.8 percent in July and down 20 percent in August. For Stoney River, comps cratered 78.3 percent in April and 62 percent in May, but rose to a decline of 25.2 percent in July and drop of 20.6 percent in August.
“The primary factors driving our rapid recovery thus far have been the strong support we have received from our great base of loyal guests and the tireless efforts of our employees who have risen to the occasion at all levels within the Company,” Parkey said. “Our historical marketing research tells us that approximately 16 percent of our guests drive approximately 66 percent of our visits. That core group of guests has been the backbone of our recovery to this point, much as they were in the aftermath of the Great Recession of 2008-2009.”
The chain, which believes it’s not big enough to be a standalone public company, retained investment banking firm Piper Sandler in August 2019 to evaluate alternatives, particularly a sale of the company. Negotiations progressed with one company, but once the pandemic hit, the buyer reduced the proposed purchase price twice. J. Alexander’s has since shelved a potential sale, and is instead focusing on bringing sales back to normal levels. The company believes it won’t conclude its evaluation of strategic alternatives until at least “sometime in 2021.”
J. Alexander’s once estimated that Q3 weekly cash burn rate would be in the range of $325,000 to $375,000 per week and that Q4 would see an improvement. But with sales exceeding expectations, the restaurant projects that it will be breakeven to modestly cash flow positive in Q3. In Q4, it expects cash flow positive in the range of $400,000 to $450,000 per week.
As of September 14, the brand has $18.6 million in cash on hand. J. Alexander’s is currently constructing a Redland Grill restaurant in San Antonio that is slated to open in Q1. It also expects to begin construction on another J. Alexander’s unit in Madison, Alabama in January.
“While we are still aware of the hurdles that remain on the horizon, and we are still taking abundant precautions within all of our restaurants to ensure the health and safety of our guests as well as our employees, we are extremely excited about the opportunity in front of us to emerge from the pandemic a stronger company than we were a few short months ago,” Parkey said.