Kona Grill, Inc., an American grill and sushi bar, reported financial results for the third quarter ended September 30.
Third Quarter 2016 Highlights vs. Year-Ago Quarter
Restaurant sales increased 20.7 percent to $43.4 million.
Same-store sales increased 0.7 percent lapping a 1.6 percent gain from the prior year and marking growth in 24 of the last 25 quarters.
Opened restaurants in Franklin, Tennessee, and Honolulu, Hawaii.
“Same-store sales rose 0.7 percent during the third quarter in the face of a soft casual dining environment and unprecedented flooding in Louisiana, which closed and limited operating hours at our Baton Rouge restaurant for several days. We are, however, pleased to have outpaced the industry benchmark by 180 basis points, extended our track record of same-store sales gains to 14 straight quarters, and to have grown same-store sales in 24 of the last 25 quarters despite these headwinds,” says Berke Bakay, president and CEO of Kona Grill.
“Our five restaurant openings within the past six months and nine restaurant openings during the trailing 12 months have resulted in Kona Grill achieving among the highest unit growth rates within the restaurant industry. We are further pleased to have expanded our footprint significantly over the past three years and will have almost doubled our restaurant portfolio from 23 restaurants in October 2013 to 45 restaurants by December 2016. However, given the size of our footprint, the high percentage of operating weeks from new restaurants combined with new restaurant inefficiencies negatively impacted third quarter profitability. In view of these factors and the soft consumer environment, we are revising our 2016 annual guidance to reflect current expectations and updated timelines for two upcoming restaurant openings. Still, even with this revised outlook, we expect to grow sales by 20 percent, achieve positive same-store sales in the 1.5 percent to 2 percent range, increase EBITDA by at least 30 percent, and increase Adjusted EBITDA by 15 percent during 2016,” he adds.
“Looking ahead, we are positioning ourselves for an even stronger 2017 and future. By targeting three new restaurant openings compared to eight, we will be better able to digest our recent high growth and increase our operational focus to ramp up four-wall margins across the entire system. We will also be able to reduce the amount of preopening and depreciation expense as well as dramatically lowering our capital expenditures for increased financial flexibility. Finally, we intend to make effective use of our recently upsized credit facility for the benefit of all shareholders,” he continues.
Third Quarter 2016 Financial Results
Restaurant sales increased 20.7 percent to $43.4 million in the third quarter of 2016 compared to $35.9 million in the third quarter of 2015. The increase was primarily driven by operating week growth of 26.4% from nine restaurants opened since October 2015.
Same-store sales increased 0.7 percent in the third quarter of 2016 as compared to a 1.6 percent increase in the third quarter of last year. The increase in same-store sales this year reflects a higher average check per customer, driven by pricing and a favorable menu mix, partially offset by a decline in traffic.
Net loss in the third quarter of 2016 was $2.6 million, or ($0.24) per share, compared to net loss of $1.5 million, or ($0.13) per share, in the year-ago quarter.
Restaurant operating profit, a non-GAAP measure, increased 7.8 percent in the third quarter of 2016 to $6 million compared to $5.6 million in the same quarter of 2015. Restaurant operating profit for the comparable restaurant base remained strong and contributed to the year-over-year increase. As a percentage of sales, restaurant operating profit was 13.8 percent compared to 15.4 percent in the third quarter last year. Three underperforming restaurants and new unit inefficiencies at five recently opened restaurants were a significant factor in the decrease in restaurant operating profit as a percentage of restaurant sales.