J. Alexander’s Holdings, Inc. reported financial results for the third quarter and nine months ended October 2.
Third Quarter 2016 Highlights Compared To The Third Quarter Of 2015
Net sales increased $2,124,000, or 4.3 percent, to $51,459,000 from $49,335,000 in the third quarter a year ago.
For the J. Alexander’s/Redlands Grill restaurants, average weekly same store sales per restaurant were $104,200, an increase of 1.4 percent from $102,800 recorded in the third quarter of 2015, and for the Stoney River Steakhouse and Grill restaurants, average weekly same store sales per restaurant increased to $61,900, or 1.8 percent, from $60,800 recorded in the third quarter of 2015. The most recent period marked the ninth consecutive quarter of increases in average weekly same store sales for Stoney River Steakhouse and Grill.
Income from continuing operations before income taxes totaled $1,177,000 during the third quarter of 2016 compared to a loss from continuing operations before income taxes of $2,437,000 in the third quarter of 2015. The results for the third quarter of 2015 were impacted by non-recurring transaction expenses of $4,197,000 associated with the spin-off from Fidelity National Financial Ventures, LLC (FNFV) in September 2015. Excluding these non-recurring transaction expenses, income from continuing operations before income taxes would have totaled $1,760,000 for the third quarter of 2015. The results also included income tax expense of $121,000 in the third quarter of 2016 and an income tax benefit of $66,000 in the third quarter of 2015.
Net income for the third quarter of 2016 totaled $945,000 as compared to a loss of $2,477,000 reported in the comparable quarter of 2015.
Chief Executive Officer’s Review/Third Quarter
“We were pleased with the overall performance of both J. Alexander’s/Redlands Grill and Stoney River Steakhouse and Grill restaurant groups in the most recent quarter,” says Lonnie J. Stout II, president and chief executive officer of J. Alexander’s Holdings, Inc. “Same store sales and guest counts were up in both restaurant groups when compared to the third quarter of 2015.”
Stout notes that the J. Alexander’s/Redlands Group posted an increase in average weekly same store sales of 1.4 percent while guest counts rose 3.4 percent for the quarter. The Stoney River concept recorded an increase in average weekly same store sales of 1.8 percent, with total weekly sales averages per restaurant up 9.0% due to the positive impact of the Company’s Stoney River restaurant in Germantown, TN. Guest counts for the Stoney River restaurants climbed 2.8 percent for the same store sales base of restaurants compared to the third quarter of 2015, and increased by 15.5 percent including the Germantown location.
“We are encouraged with the turnaround in average weekly same store sales compared to the trends we posted in the first two quarters of 2016,” Stout continues. “We believe our plan of action implemented at the beginning of the year has enabled us to achieve the intended results in terms of increasing both sales and guest counts.”
The company’s consolidated operating income for the third quarter of 2016 was $1,306,000 compared to a consolidated operating loss of $2,265,000 recorded in the comparable quarter a year ago. The company’s effective tax rate for the third quarter of 2016 was 11.4 percent compared to a benefit of 2.6 percent in the third quarter of 2015.
Restaurant labor and related costs as a percentage of net sales totaled 32.1 percent for both the third quarter of 2016 and the comparable quarter a year earlier. Other restaurant operating expenses were 21.1 percent of net sales during the third quarter of 2016 compared to 21.3 percent of net sales in the corresponding quarter a year ago.
Average guest checks, which include alcoholic beverage sales, for the combined J. Alexander’s/Redlands Grill concepts decreased 1.8 percent to $30.11 in the third quarter of 2016 compared to $30.67 in the corresponding quarter of 2015. Average guest checks for the same store base within the Stoney River Steakhouse and Grill concept were down 0.8 percent to $45.52 in the third quarter of 2016 from $45.89 in the third quarter of 2015. Including the Germantown Stoney River location, which is open for both lunch and dinner, average guest checks totaled $43.44 during the third quarter of 2016, a 5.4 percent decrease from the third quarter of 2015. The effect of menu price adjustments for the most recent quarter was estimated to be a 0.6% decrease for the J. Alexander’s/Redlands Grill restaurants and a 0.7 percent decrease for the Stoney River Steakhouse and Grill restaurants compared to the same period a year earlier. Deflation in food costs for the third quarter of 2016 was estimated to total 1.5 percent for the J. Alexander’s/Redlands Grill restaurants, with beef costs declining by approximately 6.4 percent compared to the third quarter of 2015. For the Stoney River Steakhouse and Grill restaurants, deflation for the third quarter of 2016 was an estimated 2.7 percent, with beef costs declining by approximately 6.4 percent compared to the third quarter a year ago.
Stout notes that the company has incurred certain general and administrative expenses as a public company that did not exist in previous periods while the Company was a majority-owned subsidiary of FNFV. During the third quarter of 2016, J. Alexander’s Holdings, Inc. incurred approximately $300,000 of public company costs that it did not incur in last year’s third quarter. The Company also incurred consulting fees of $133,000 during the third quarter of 2016 from its management agreement with Black Knight Advisory Services, LLC (“Black Knight”) and recognized $246,000 of non-cash profits interest compensation expense for Black Knight in the third quarter of 2016.
First Nine Months 2016 Highlights
For the first nine months of fiscal 2016, the company recorded net sales of $162,259,000, up 2.3 percent from $158,610,000 during the comparable three quarters of fiscal 2015. The New Year’s Eve week, traditionally one of the Company’s strongest sales weeks, occurred twice during fiscal 2015, which had a positive impact on both the first and fourth quarters of fiscal 2015. Fiscal 2016 began January 4, 2016 and, as such, did not receive the benefit of the New Year’s Eve week during the first nine months of fiscal 2016. Income from continuing operations before income taxes was $5,860,000 for the first three quarters of 2016 compared to $3,306,000 for the first three quarters of 2015. Included in the results were non-recurring transaction expenses of $62,000 in the first nine months of 2016 and $6,311,000 in the corresponding three quarters of 2015. Excluding these non-recurring transaction expenses, income from continuing operations before income taxes would have totaled $5,922,000 for the first nine months of 2016 and $9,617,000 for the corresponding nine months of 2015. Results also included income tax expense of $1,210,000 in the first three quarters of 2016 and an income tax benefit of $45,000 in the first three quarters of 2015.
Within the J. Alexander’s/Redlands Grill restaurants, average weekly same store sales per restaurant totaled $109,100 for the first nine months of 2016, down 1.2 percent from $110,400 in the first three quarters of 2015. For the Stoney River Steakhouse and Grill restaurants, average weekly same store sales totaled $68,500 for the first nine months of 2016, up 1.3 percent from $67,600 during the first nine months of 2015.
Guest counts within the same store base of restaurants increased by 0.6 percent within the J. Alexander’s/Redlands Grill restaurants for the most recent nine-month period, and rose by 1.3 percent within the Stoney River Steakhouse and Grill restaurants in the first nine months of 2016. Total guest counts for the Stoney River locations increased by 11.5 percent during the first nine months of 2016 compared to the same period of 2015. The average guest check at the combined J. Alexander’s/Redlands Grill locations decreased by 1.8 percent, from $30.71 during the first nine months of 2015 to $30.17 during the first nine months of 2016, while the Stoney River average guest check decreased by 3.7 percent, from $45.54 to $43.86 during the same comparative periods. Within the same store base of ten Stoney River locations, the average guest check increased by 0.2 percent from $45.54 during the first nine months of 2015 to $45.63 during the corresponding period of 2016. The effect of menu price changes for the first nine months of 2016 was estimated to be a 0.9 percent decrease at J. Alexander’s/Redlands Grill locations and a 0.1% decrease at the Stoney River restaurants compared to the first nine months of 2015.
Cost of sales as a percentage of net sales for the nine months ended October 2, 2016 was 31.9 percent as compared to 31.6 percent in the first nine months of 2015. Deflation in food costs for the three quarters of 2016 was estimated to total 1.1 percent for the J. Alexander’s/Redlands Grill restaurants, with beef costs declining by approximately 2.6 percent compared to the first three quarters of 2015. For the Stoney River Steakhouse and Grill restaurants, deflation for the first three quarters of 2016 was an estimated 1.6 percent, including an estimated 3.3 percent decline in beef costs on a comparative basis. Restaurant labor and related costs for the most recent nine months was 30.9 percent of net sales, up from 30.5 percent of net sales in the comparable period of 2015. Other restaurant operating expenses increased to 20.3 percent of net sales during the most recent nine-month reporting period from 20.2% of net sales in the first three quarters of 2015. Restaurant operating profit margins for the first nine months of 2016 were 12.9 percent, down from 13.7 percent in the same nine months of 2015.
For the nine months ended October 2, 2016, J. Alexander’s Holdings, Inc. incurred approximately $900,000 of public company costs that it did not incur in the first nine months of 2015. The Company also incurred consulting fees of $451,000 during the first nine months of 2016 from its management agreement with Black Knight and recognized non-cash profits interest compensation expense for Black Knight totaling $1,158,000.
