McCormick & Schmick's Seafood Restaurants, Inc. Q1 2010 Earnings Call Transcript

McCormick & Schmickâ¿¿s Seafood Restaurants, Inc. Q1 2010 Earnings Call Transcript
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McCormick & Schmick’s Seafood Restaurants, Inc. (MSSR)

Q1 2010 Earnings Call

May 5, 2010 5:00 pm ET


William Freeman – Chief Executive Officer

Michelle Lantow – Chief Financial Officer


Jeff Farmer – Jefferies & Company

Jeff Omohundro - Wachovia

Analyst for Matt DeFrisco – Oppenheimer

Nicole Miller – Piper Jaffray




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Welcome to the McCormick & Schmick’s Seafood Restaurants, Inc. first quarter 2010 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Michelle Lantow, McCormick & Schmick's Seafood Restaurants, Inc. CFO. Please go ahead, Ma’am.

Michelle Lantow

Good afternoon everybody and thank you for joining us today. By now everyone should have access to our first quarter 2010 earnings press release. It may also be found at

under the investment relations section.

Before we begin our formal remarks, I need to remind everyone that part of our discussion today will be forward-looking statements. These statements are not guarantees of future performance and therefore you should not put undue reliance upon them. We refer all of you to our recent filings with the SEC for more detailed discussion of the risks that could impact our future operating results and financial conditions.

I would now like to turn the call over to our CEO, William Freeman, to review some of the highlights from this past quarter.

William Freeman

Thank you Michelle. I would like to begin our discussion today with some highlights of this past quarter as well as touch on our primary areas of focus. Afterwards Michelle will review our financial results for the first quarter as well as discuss our 2010 annual guidance.

In the middle of last year I outlined a series of initiatives as part of a long-term platform for the company that would allow us to enhance the viability of our company for the future. These initiatives were designed to increase traffic during a difficult economic time, expand our connection to a broader audience and in the long-term strengthen our positioning as the leading national affordable, upscale seafood concept. We knew some of these initiatives would challenge our short-term results from a traditional, comparable viewpoint. We also believed and continue to believe this platform will provide the long-term results needed to deliver the increases in shareholder value required to maintain our leadership position in the industry.

In the past quarter we continued to make great progress on implementing and executing these initiatives as part of our long-term strategy and continue to hear positive feedback from our guests related to these enhancements. For the first quarter we continued to sequentially improve our comparable sales and traffic trends while narrowing our net loss per diluted share to $0.03 compared to a net loss of $0.08 in the year-ago period. Our team remains highly motivated and committed to balancing the needs of our guests while employing prudent cost management techniques. Our continued focus of execution in both of these important areas is reflected in our financial results for the first quarter.

Comparable sales and traffic for the quarter ending March 27


were down 9.6% and 6.2% respectively which are sequential improvements of 330 basis points and 80 basis points from what we reported in the fourth quarter. Weather conditions had a significant adverse impact on our results for the period as more than 1/3 of our portfolio and many of our higher volume restaurants were affected by unprecedented severe winter weather. This was most readily apparent in the D.C., Baltimore Metro area where there were a number of convention and private event business cancellations along with multi-day closings at 12 of the 13 restaurants we operate in this market.

Taking into account the mid-Atlantic winter combined with worse than typical winter weather in the Midwest and Northeast resulted in multi-day closings, we estimate we lost approximately $1.5 million to $1.7 million in sales due to snow related issues. Despite the temporary weather setback we are seeing signs of stability characterized by steady progression across our restaurant portfolio. In fact, we have now reported improving sequential traffic trends for three consecutive quarters. This gives us confidence the measures we have taken to improve connectivity to our existing guests while also attracting new guests are working.

As we have said in the past we believe that driving more traffic through deliberately managing our check average down, driving higher guest satisfaction and broadening our guest base will result in higher sales levels on a long-term basis. This long-term strategic decision in the middle of last year to drive our average check down had a negative impact on our short-term comparable sales results but had a positive impact on our traffic results.

In addition we are encouraged by the sequential improvement in our monthly sales trends during the quarter. Our early-week sales trends on Mondays, Tuesdays and Wednesdays are also starting to rebound which suggests the business guest base is beginning to strengthen as well. We are continuing our efforts to drive traffic by creating more value for our guests through initiatives such as our $19.95 entry price point to our culinary promotional offering and 10 under $10 lunch platforms, both of which continue to make up a high percentage of menu mix.

The combined 3.4% decrease in net pricing we saw during the first quarter and the fact that our check average was down 6.5% compared to the year-ago period were both reflective of these initiatives. We believe that improving traffic which is being accomplished in part by reducing our average check provides us with a great opportunity to drive increased financial performance as the economy stabilizes, consumers become less price sensitive and spending levels increase.

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