(CPKI) California Pizza Kitchen Earnings Matche Estimates

California Pizza Kitchen, Inc. (CPKI), one of the leading casual dining restaurant chains, recently posted first-quarter 2010 results that were in line with the Zacks Consensus Estimate. Moreover, the company provided a second-quarter earnings guidance that matched the average forecast.

Quarterly earnings of 10 cents per share were in line with the Zacks Consensus Estimate, but dropped 9.1% from 11 cents in the prior-year quarter.

The casual dining operator now expects second-quarter 2010 earnings in the range of 24 cents to 26 cents per share, compared to the current Zacks Consensus Estimate of 25 cents.

The pizza restaurant chain said that total revenue for the first quarter dropped 2.7% year-over-year to $156.7 million. Comparable-store sales fell 2.7% in the quarter, reflecting a year-over-year improvement of 320 basis points, and fared better than the guidance range of negative 3% to negative 4%.

Management also hinted that a shift in Easter holidays and bad weather conditions adversely impacted comparable-store sales by about 1.3%. California Pizza also registered improvement in comparable-store sales across the dine-in, take-out, and delivery channels. However, traffic count still remained negative, falling 6.8% in the quarter. Comparable-store sales are now expected to decline between 0.5%-2.5% in the second-quarter 2010.

In order to plug its falling comparable-store sales, California Pizza Kitchen has implemented several sales-building programs. These initiatives include new menu offerings, a new wine list featuring over 30 distinctive wines, a central call center to serve customers for off-premise dining orders, as well as a catering program.

Comparable-store sales and traffic have sagged, as consumers with lower disposable incomes are dining out less or looking at cheaper alternatives, such as fast food restaurant operators like Yum! Brands, Inc. (YUM) and McDonald’s Corp. (MCD).

California Pizza Kitchen said that restaurant sales tumbled 2.7% to $154.4 million, royalties from the licensing agreement dropped 9.3% to $1 million and international franchise revenue fell 3% to $549,000, partially offset by domestic franchise revenue that rose by 7.9% to $672,000.

The restaurant operating cash flow margin contracted 10 basis points (bps) to 15.6% due to an 80-bps rise in operating and occupancy costs to 22.7%, offset by a 30-bps fall in food and beverage costs to 23.6% and a 40-bps decline in labor costs to 38.1%.

The company ended the quarter with cash and cash equivalents of $7.4 million, total debt of $10 million, and shareholders’ equity of $194.6 million.

Management expects to open one international full service franchised restaurant and three domestic franchised restaurants in the second-quarter 2010.

In April 2010, California Pizza announced the hiring of Moelis & Company, a global investment bank, for financial and strategic advice on changes in its capital structure, exploration of sale possibilities, merger or other business combinations and opportunities.

Founded in 1985, California Pizza Kitchen currently operates, licenses or franchises 253 locations, of which 204 are company-owned and 49 are either franchised or licensed.

Zacks Investment Research

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