Shares of Einstein Noah Restaurant Group, Inc. (BAGL) rose more than 28 percent in extended trade on Thursday after the company reported a sharp increase in first-quarter profit and said it is exploring a possible merger or sale of the company. Earnings per share for the quarter beat analysts' estimates, while revenues missed their expectations.
Company-owned restaurant sales for the quarter rose 4.1 percent.
System-wide comparable store sales grew 1.1 percent, reflecting 5 percent growth in average check that was primarily driven by a strong increase in catering sales. This was partially offset by lower comparable transactions, as the company lapped some discounting activity from the year-ago period.
Gross margin expanded to 21.6 percent from 17.6 percent in the year-ago period.
Jeff O'Neill, President and CEO of Einstein Noah Restaurant Group, stated, "We experienced a very strong start to 2012 with positive comparable store sales and significant growth in adjusted EBITDA and net earnings. Our new smart choices menu and expanded specialty beverage platform is helping to facilitate top-line momentum, while we substantially improved gross margins through our ongoing cost efficiency program and sales leverage."
The company's first-quarter net income was $3.20 million or $0.19 per share, up from $1.17 million or $0.07 per share in the year-ago quarter.
Total revenues for the quarter grew 3.6 percent to $104.87 million from $101.25 million in the year-ago period.
On average, analysts polled by Thomson Reuters expected the company to earn $0.11 per share for the quarter on revenues of $105.74 million. Analysts' estimates typically exclude special items.
Looking ahead to fiscal 2012, Einstein Noah reiterated its outlook for capital expenditure in a range of $24 million to $26 million.
The company also reaffirmed its outlook for 60 to 80 system-wide openings, including eight to twelve company-owned restaurants, twelve to fourteen franchise restaurants, and 40 to 54 license restaurants.
Einstein Noah's board declared a quarterly cash dividend of $0.125 per share, payable on July 15 to stockholders of record as of June 1.
In a separate press release, Einstein Noah said its board has authorized a review of strategic alternatives, including a possible business combination or sale of the company, to maximize value for all stockholders.
As part of the evaluation process, the board has selected Piper Jaffray to serve as its financial advisor and Bryan Cave HRO to serve as its legal advisor.
As of March 31, 2012, Greenlight Capital, L.L.C. and its affiliates beneficially own approximately 64 percent of the company's common stock.
As a result, Greenlight Capital has sufficient voting power, without the vote of any other stockholders, to determine whether a change in control of the company can occur.
Einstein Noah operates and licenses locations primarily under the Einstein Bros and Noah's New York Bagels brands, and primarily franchises locations under the Manhattan Bagel brand.
BAGL closed Thursday's trading at $14.04, down $0.05 or 0.35 percent on a volume of 34,794 shares. In after-hours trading, the stock gained $4.05 or 28.85 percent to $18.09.
by RTT Staff Writer
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