Knobias Clip Report (10-30-2008) KONA
Submitted By Knobias ClipReport
KONA: CEO Comments on Q3 Results and Outlook for Q4 and FY09
By Fain Hughes, fhughes@knobias.com
Shares of Kona Grill, Inc. (KONA) declined in Thursday’s session after the Company reported its Q3 financial results for the third quarter ended September 30, 2008.
Restaurant sales from continuing operations increased 4.3% to $19.5 million from $18.7 million during the same quarter last year. The increase in restaurant sales during the third quarter reflects additional revenue from three stores opened since November 2007, partially offset by an overall reduction in guest traffic. Restaurant sales reflect a 10.3% decrease in same-store sales versus a same-store sales increase of 4.9% in the 2007 period.
Loss from continuing operations for the third quarter of 2008 was ($0.7) million, or ($0.11) per diluted share compared to income from continuing operations of $0.6 million or $0.10 per diluted share last year.
For the fourth quarter of 2008, the Company forecasts sales of $19.3 million to $19.8 million and a net loss from continuing operations of ($1.2) million to ($1.5) million, or ($0.18) to ($0.23) per diluted share. For fiscal year 2008, the Company is revising its guidance to reflect the closure of the Naples, FL restaurant. The Company is now forecasting sales of $76.5 million to $77.0 million and a loss from continuing operations of ($2.8) million to ($3.1) million, or ($0.43) to ($0.48) per diluted share.
Marcus E. Jundt, President and CEO of Kona Grill, commented in a conference call, “Like most restaurant companies, our margins continued to be compressed by higher labor and operating costs, however, we were able to offset some of this margin pressure with better management of our food costs despite increases in several of our commodity ingredients in the past year. Our unit economic model exemplifies relative strength in any environment. While the economic climate may remain difficult for some time, we continue to research ways to improve our positioning and ability to succeed when conditions on the ground begin to improve.”
He continued, “We are managing our company in areas that will benefit us in the long term. We are on track to open three new restaurants in Q4. As we look ahead, our financial discipline assures that we will apply capital for only the best possible uses, restricting development to sites that meet our stringent criteria and limiting our debt to levels that maintain maximum financial flexibility. Our 2009 development schedule includes four new openings. We are utilizing the uncertainty of the commercial real estate market to its fullest advantage by taking our time with site selection and negotiations.”
Mr. Jundt concluded, “While we remain growth oriented, we will not pursue growth at any costs. If the current financial turmoil has taught us anything, it is that we must strike the appropriate balance between enthusiasm for our concept and a healthy dose of caution in an uncertain environment.”
Craig Hallum upgraded KONA today to Buy from Accumulate based on valuation. The price target was reduced to $14 from $17.
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