J. Alexander’s Holdings, Inc. reported financial results for the 13 weeks of the first quarter ended April 3.
First Quarter 2016 Highlights Compared To The First Quarter Of 2015
Net sales increased 1.2 percent to $56,879,000 in the most recent quarter from $56,184,000 in the first quarter of 2015. Factors that impacted sales during the comparable quarters included the following:
The New Year’s Eve week, traditionally one of the company’s strongest sales weeks, occurred twice during fiscal 2015 and this had a positive impact on both the first and fourth quarters of fiscal 2015. The first quarter of 2016 began January 4, and, as such, did not receive the benefit of the New Year’s Eve week. The estimated impact on sales due to the absence of New Year’s week in the first quarter of fiscal 2016 was $905,000 within the same store base of restaurants, and the corresponding estimated impact on pre-tax income was $535,000, which had a negative impact on comparability of the two periods.
During the first quarter of 2015, the company closed affected J. Alexander’s/Redlands Grill restaurants and Stoney River Grill and Steakhouse restaurants a total of 17 and 15 days, respectively, due to weather-related conditions. As a result of a milder winter during 2016, the company closed affected J. Alexander’s/Redlands Grill restaurants and Stoney River Grill and Steakhouse restaurants a total of five and six days, respectively, during the most recent quarter.
During the first quarter of 2015, the company closed its Troy, Michigan J. Alexander’s restaurant for 35 days while it underwent a significant remodel. No corresponding closures existed during the first quarter of 2016.
On January 25, the company opened a Stoney River Steakhouse and Grill in Germantown, Tennessee. The first quarter of 2016 reflects results of operations for the 10 weeks this restaurant was open during the quarter.
For the J. Alexander’s/Redlands Grill restaurants, average weekly same store sales per restaurant were $115,000, down 3 percent from $118,600 in the first quarter a year earlier. For the Stoney River Steakhouse and Grill restaurants, average weekly same store sales increased for the seventh consecutive quarter, rising by 0.7 percent to $75,100 from $74,600 in the first quarter of 2015.
Income from continuing operations before income taxes amounted to $2,999,000 during the first quarter of 2016 compared to $4,961,000 in the first quarter a year ago.
Net income for the first quarter of 2016 totaled $2,290,000, down from $4,773,000 recorded in the first quarter of 2015.
Stock Repurchase Program
During the fourth quarter of 2015, the company’s board of directors authorized a share repurchase program for up to 1.5 million shares of the company’s outstanding common stock over the next three years, ending October 29, 2018. The company expects to fund share repurchases from cash on hand and operating cash flow. Repurchases will be made in accordance with applicable securities laws and may be made from time to time in the open market. The timing, prices and amount of repurchases will depend upon prevailing market prices, general economic and market conditions and other considerations. The repurchase program does not obligate the company to acquire any particular amount of stock. During the first quarter of 2016, 53,250 shares were repurchased by the company under this program at an aggregate purchase price of $539,000.
Chief Executive Officer’s Review/First Quarter
“As reported in our year end release for 2015, the sales softness in certain J. Alexander’s/Redlands Grill restaurants that impacted results in last year’s final quarter continued in the first quarter of 2016,” says Lonnie J. Stout II, president and chief executive officer of the company.
Stout also notes that the first quarter of 2015 was a particularly strong quarter for the J. Alexander’s/Redlands Grill restaurants, reflecting a same-store sales increase of 6.1 percent compared to the first quarter of 2014, and that average weekly same store sales within this group of restaurants increased from $92,000 per week in 2010 to $118,600 per week in 2015, a compounded annual growth rate of 5.2 percent during the five year period.
Stout says the company’s Stoney River Steakhouse and Grill concept turned in another solid quarter. ”We were pleased with the increase in Stoney River’s average weekly same store sales during the first quarter of 2016 and particularly pleased with the 5 percent increase in average weekly sales per restaurant within the Stoney River concept, which reflects the impact of our recently opened Stoney River in Germantown, Tennessee. Since this restaurant opened, sales have averaged in excess of $115,000 each week.”
Stout adds the company’s consolidated operating profits for the first quarter of 2016 were $3,172,000 as compared to $5,376,000 recorded in the corresponding quarter a year ago. “On the positive side, we estimated our annual effective tax rate going into 2016 would be 30 percent whereas the actual calculation yielded an effective tax rate of approximately 21 percent for the first quarter of 2016.”
For the quarter ended April 3, the company’s restaurant labor and related costs as a percent of net sales were 29.8 percent as compared to 29.2 percent in the first quarter a year earlier. Other restaurant operating expenses totaled 19.4 percent of net sales for both the first quarter of 2016 as well as the corresponding quarter in 2015.
The average weekly guest counts within the same store base for the company’s Stoney River Steakhouse and Grill restaurants were down 0.5 percent for the first quarter of 2016. Guest counts within the same store base at the Company’s J. Alexander’s/Redlands Grill concept decreased by 1.5 percent in the most recent quarter.
Average weekly guest checks, which include alcoholic beverage sales, for the J. Alexander’s/Redlands Grill restaurants decreased 1.5 percent to $30.54 in the first quarter of 2016 compared to $31.01 during the corresponding quarter of 2015. Average guest checks for the Stoney River Steakhouse and Grill concept were down 1.8 percentto $44.96 in the first quarter of 2016 compared to $45.79 during the first quarter of 2015. The effect of menu pricing for the quarter just ended was estimated to be a 0.8 percent decrease for the J. Alexander’s/Redlands Grill restaurants and a 0.4 percent increase for the Stoney River Steakhouse and Grill restaurants compared to the same quarter a year earlier.
Stout adds that, as a public company once again, there are certain fees and expenses now being incurred which were not present during the years the company was a majority-owned subsidiary of FNFV.
“In the most recent quarter, we incurred approximately $250,000 of public company costs that we did not incur last year. We also incurred consulting fees of $160,000 during the first quarter of 2016 from our management agreement with Black Knight Advisory Services, LLC (“Black Knight”). Profits interest compensation expense for Black Knight was $594,000 in the first quarter of 2016.”
Outlook for 2016/Guidance
“We’re offering lower-priced features in selected J. Alexander’s/Redlands Grill markets and have modified menus and pricing in most of our Ohio restaurants to address sales issues,” Stout notes. “We believe this will contribute toward moving us back on track to build sales.”
Based upon current information, Stout says the company’s previously released guidance for 2016 as disclosed in the company’s release dated March 9, with the exception of the 2016 effective tax rate previously noted, remains unchanged.
Restaurant Development
On January 25, the company opened a new Stoney River Steakhouse and Grill in Germantown near Memphis. The company also has two J. Alexander’s restaurants under lease scheduled to open during the fourth quarter of this year, one in Raleigh, North Carolina, and one in Lexington, Kentucky. The company expects to open the 12th Stoney River Steakhouse and Grill restaurant in the final quarter of this year at a site soon to be announced. The company is also continuing its program to transition selected J. Alexander’s restaurants to Redlands Grill restaurants by the end of the current year.
