Kona Grill, Inc., an American grill and sushi bar, reported financial results for the first quarter ended March 31.
First Quarter 2016 Highlights vs. Year-Ago Quarter
- Restaurant sales increased 19.7 percent to $39.3 million.
- Same-store sales increased 3.6 percent lapping a 2.2 percent gain from the prior year and marking growth in 22 of the last 23 quarters.
“Same-store sales growth of 3.6 percent reflects a great start to the year and demonstrates the strength of the Kona Grill brand in a soft casual dining environment as we outpaced the industry benchmark by 420 basis points, our highest rate of outperformance since 2014. We have now also extended our track record of same-store sales gains to 12 consecutive quarters and have achieved growth in 22 of the last 23 quarters,” says Berke Bakay, president and CEO of Kona Grill.
“The combination of strong same-store sales and the favorable commodities environment resulted in a 140 basis point improvement in operating profit margins to 18.5% at our comparable restaurant base. However, our non-comparable base average weekly sales and margins were negatively impacted by three new restaurants that have started off slower than anticipated. This was due in part to nearby construction, which has limited visibility and access to them but we are working closely with our landlords to remedy. We believe that sales will ramp up as we build brand awareness and construction is completed in these centers. Above all, we remain confident that we can achieve our 2016 guidance of both restaurant sales and adjusted EBITDA growth of 25 percent as well as 20 percent unit growth.
“We have now executed international franchise agreements for the United Arab Emirates and Mexico for a total of twelve restaurants and are also holding ongoing discussions with groups for potential development in other territories. Together with our new partners, we are working diligently to open the first Kona Grill restaurants internationally during the first half of 2017. We consider the long-term potential for growth of the Kona Grill brand, internationally and domestically, to be substantial and are approaching that opportunity with great excitement and discipline,” Bakay concludes.
First Quarter 2016 Financial Results
Restaurant sales increased 19.7 percent to $39.3 million in the first quarter of 2016 compared to $32.8 million in the first quarter of 2015. The increase was primarily driven by operating week growth of 21.9 percent from seven restaurants opened since March 2015.
Same-store sales increased 3.6 percent in the first quarter of 2016 as compared to a 2.2 percent increase in the first quarter of 2015. The increase in same-store sales this year reflects a higher average check per customer, a slight increase in traffic as well as one additional operating day—Leap Day. These factors were slightly offset by the shift of Easter into the first quarter of 2016 from the second quarter of 2015.
At March 31, 2016, cash and cash equivalents totaled $3.5 million compared to $9.1 million at December 31, 2015. During the first quarter of 2016, the company repurchased and retired 80,406 shares totaling $1 million under its $10 million stock repurchase plan authorized in November 2015. The company had $5 million in borrowings on its $35 million line of credit at March 31, 2016.
The company reaffirms its 2016 guidance of $179 million in restaurant sales compared to $143 million in 2015, representing 25 percent year-over-year growth and has increased its same-store sales growth estimate from 2 percent to 2.5 percent.
The company projects capital expenditures, net of tenant allowances, to range from $33 million to $35 million, primarily related to new restaurant development and remodeling initiatives.
The company expects to open eight restaurants in 2016, representing over 20 percent unit growth. The company opened its first restaurant of the year in Irvine, California, on April 12, and expects to open two additional restaurants in Minnetonka, Minnesota and Fairfax, Virginia, during the second quarter of 2016.
International Development Update
On April 5, the company entered into an agreement with Hakaya Collection, a subsidiary of RAK Hospitality Holding, for the development of six franchise locations in the United Arab Emirates over the next seven years. Earlier this year, the Company signed an agreement with Grupo Roma for the development of six franchise locations in Mexico over the next seven years.