'Aggressive' actions cost Cosi in quarter
by Eric Schroeder
BOSTON — R.J. Dourney, president and chief executive officer of Cosi, Inc., said the fast-casual restaurant chain operator’s management team took “aggressive, corrective actions” during the second quarter to try and ensure the long-term health of Cosi. Unfortunately, the actions came at a cost, as the company sustained a loss of $4,814,000 in the second quarter ended June 30. This compared with a loss of $2,135,000 in the same period a year ago.
“These actions came at a cost, one I view as an investment in the future,” said Mr. Dourney, who took over as president and c.e.o. in mid-March.
Excluding the impact of one-time costs, the company incurred a loss of $2,711,000 during the quarter. Revenues slipped 12% to $20,670,000 from $23,408,000, reflecting a decline in comparable company-owned restaurant sales and the closing of company-owned and franchise locations during the second quarter.
In an Aug. 14 conference call with analysts, Mr. Dourney said Cosi worked “tirelessly” during the second quarter to wrap up two initiatives. First, the company moved to get underperforming restaurants out of the portfolio.
“I wasn’t going to wait a year or two years or hope that maybe we could get it done,” he said. “We got it done very quickly. So the underperforming stores have been taken out of the mix.”
Cosi removed itself from 10 leases, shuttering the locations, Mr. Dourney said.
Second, Cosi took a sizable step in reducing SG&A.
“We moved out of a 27,000-square-foot office in Deerfield (Ill.) into 7,000 square feet here in Boston,” Mr. Dourney said. “That alone was a sizable savings. We reduced headcount at the corporate level. The support center is running on the balls of their feet right now — appropriately, which is the right thing to do. When you are in a turnaround, nobody should be eating bonbons.”
With those two initiatives complete, Mr. Dourney said Cosi may now focus on driving the top line.
“One of the things that Cosi has a model, historically is very, very good at, is leveraging comp-store sales,” he said. “So as this thing starts to traject into positive comps territory, the incremental sales are very profitable dollars. And I am excited about seeing what happens to the bottom line as we do that.”