Einstein earnings ease 21% in third quarter

by Eric Schroeder
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LAKEWOOD, COLO. — Net income at Einstein Noah Restaurant Group, Inc. fell 21% in the third quarter ended Sept. 27 to $2,835,000, equal to 17c per share on the common stock. This compared with income of $3,583,000, or 22c per share, in the third quarter of fiscal 2010.

Revenues in the third quarter increased 2%, to $103,532,000 from $101,361,000.

“System-wide comparable store sales improved sequentially for the third consecutive quarter, and we also benefitted from sustained growth in our franchise, license and manufacturing revenues,” said Jeff O’Neill, president and chief executive officer. “Although higher food costs pressured margins, we effectively controlled the remainder of our expenses and are on track to deliver annualized savings of $3 million. Looking ahead, we continue to identify and evaluate ways to streamline our business model without impacting the customer experience, with a particular emphasis on distribution network costs and manufacturing opportunities.

“In addition, our asset light, franchise first model allows us to grow our brand through unit expansion while returning value to our shareholders via our dividend program.”

Mr. O’Neill said that, from a brand perspective, Einstein Noah is focused on the core breakfast and lunch day parts.

“Specifically, we are focusing on everyday value with our $5 under 400 calories ‘thintastic’ bundle, highlighting delicious fresh baked food offerings such as premium sandwiches, lower calorie bagel thins, and an enhanced coffee platform with dedicated baristas,” he said. “Finally, we are building our catering business, which grew approximately 20% in the quarter, and we continue to evolve our franchise network, and license channel which will be a key contributor to our long-term earnings leverage.”

Einstein said it expects to open between 60 and 65 total restaurants in 2011, down from the previous forecast of 75 to 90. The lower number reflects campus license units that now are expected to open after the holiday season to coincide with the return of students in January.

For the nine months ended Sept. 27, net income was $7,083,000, or 43c per share, down 8% from $7,709,000, or 47c per share, in the same period a year ago. Total revenues were $308,455,000, up nearly 1% from $305,646,000.

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