Turnaround on track for Einstein Noah

by Monica Watrous
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LAKEWOOD, COLO. — An emphasis on value, better-for-you offerings and catering benefited Einstein Noah Restaurant Group, Inc. during a transitional year. The operator of Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel brands overcame weather- and holiday-related headwinds to deliver its best traffic performance in several years.

“2013 was a transition year, which followed the strategic alternative process in 2012,” said Michael Arthur, interim president and chief executive officer, during a Feb. 27 earnings call with analysts. “The company worked on improving the business, implementing new sales and marketing strategies and with an operations team focused on a plan to win. These initiatives, combined with increased traffic and high-volume unit openings, will serve as the foundation for future growth. In 2014, we will continue our momentum, continually improving our product line, sales and traffic growth and with a strong pipeline of company, franchise and licensed locations.”

Plans to build on the momentum in 2014 include roll-outs of digital menu boards and radio advertising, targeted product promotions and enhancements to the catering program.

“We continue to focus our position as a destination for healthy options with our revamped Smart Choices menu,” said Manny Hilario, chief operating officer. “Smart Choices boasts a selection of butter-free alternatives with less than 380 calories and 15 grams of fat. It already comprised about 15% of our sales, and we believe this will remain an important element of our menu going forward.”

Expansion also is helping drive a turnaround for the company, which in 2013 opened a record 61 restaurants, with 19 during the fourth quarter, for a total of 852 in operation. Einstein Noah expects to open 75 to 85 units in 2014. Additionally, aggressive remodeling plans are under way, with 10 stores completed in 2013 and 50 to 60 updates scheduled across various markets this year.

For the year ended Dec. 31, 2013, net income rose 14% to $14,565,000, equal to 84c per share on the common stock, compared with $12,741,000, or 75c per share, the year before. Total revenues increased 1.8% to $434,481,000 from $427,006,000 the previous fiscal year.

Fourth-quarter income climbed to $4,852,000, or 28c per share, up 53% from $3,167,000, or 19c per share, in the same period of the prior year. Revenues for the quarter totaled $114,190,000, up 3.2% from $110,646,000, reflecting a 1.9% increase in company-owned restaurant sales, as well as increased manufacturing revenues and franchise- and license-related revenues. System-wide comparable store sales rose 0.1%, with 1.1% growth in average check offset by a 1% decline in transactions. Unfavorable weather and a shortened holiday season negatively affected performance.

Einstein Noah’s board of directors is searching for a permanent c.e.o. and president after Jeff O’Neill resigned Feb. 24. Mr. O’Neill had served as c.e.o. since December 2008 and was president and c.e.o. before resigning. Mr. Arthur, a director of the company since October 2004, was named to the post in the interim.
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