Einstein Noah feeling pressure in p.m.

by Monica Watrous
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LAKEWOOD, COLO. – Languishing lunch traffic remains a challenge for Einstein Noah Restaurant Group, Inc., which reported a system-wide comparable sales decline of 1.4% during the third quarter.

“We have consecutively targeted ourselves as a strong and unique breakfast destination with our fresh-baked positioning, everyday value and strong innovation,” said Jeff O’Neill, president and chief executive officer, during an Oct. 31 call with analysts to discuss earnings. “But continued price competition from Q.S.R. and aggressive pricing from casual dining poses an ongoing lunch challenge. Recent lunch additions to the menu, like our gourmet grilled cheese sandwich and our creamy tomato soup and drink combo, have proven to be a good addition to our lunch lineup, and we have more plans to discuss in this area as 2014 unfolds.”

For the quarter ended Oct. 1, net income rose 18% to $4 million, equal to 23c per share, compared with $3.4 million, or 20c per share, during the same period of the prior year.

Total revenues increased 0.9% to $106.4 million from $105.5 million last year.

Catering sales increased 13% during the quarter, down from higher growth in recent periods.

“We are building our catering muscle not only for the balance of the year but into next year,” Mr. O’Neill said. “We’ve got a real extensive database, over 250,000 customers in that database, and we are going after them in a more targeted way that we believe and are seeing is having an impact on our catering business. We have also looked at improving our outbound call center for catering as well.”

The company’s bulk business, which includes grab-and-go buckets and in-store bundles, and catering represent about 30% of its business.

“Those are big check drivers,” Mr. O’Neill said. “As we grow that piece of the business strongly, we know that that takes care of check a great deal and really helps our overall mix out pretty significantly.”

In October, the company saw a rebound in traffic trends that amounted to one of its best periods in the past two years.

“As we move into the fourth quarter and beyond, I believe that we are well-positioned to grow revenues and comp store sales,” Mr. O’Neill said. “We have successfully tested media this year and plan to expand that test to a number of D.M.A.s next year. In addition, we have restructured around specialty beverage innovation and have invested in our call center, which is showing early signs of accelerating growth in catering as we move into the fourth quarter. We have also tested digital L.T.L. boards at Noah's this year, and based on these results we will be rolling them out across our system in the first half of 2014. Most importantly, we have an impressive lineup of news and promotions next year that we are expecting to bring a renewed level of interest and excitement to the brand.”
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