Whenever I walk into a crowded restaurant with my mother, she remarks, "This place is a gold mine."

Mom doesn't frequent the publicly held restaurant chains like P.F. Chang's ( PFCB) or the Cheesecake Factory ( CAKE). But if she did, she certainly wouldn't be uttering that phrase.

The casual-dining restaurant chains' earnings reports this week stunk about as badly as a week-old asparagus and mushroom quesadilla with extra sour cream. The main culprit? Traffic. People just aren't showing up anymore.

Cheesecake Factory saw first-quarter traffic decline by roughly 1%, the company reported Tuesday. At Brinker ( EAT), whose chains include Chili's and Romano's Macaroni Grill, traffic was down more than 5% in the quarter. IHOP ( IHP) also recorded traffic declines.

Many companies, as they are apt to do, blamed the lack of customers on the weather. While weather can hurt sales, especially if there are nasty storms, you rarely hear a company credit sunny comfortable days for an increase in sales. It hasn't rained in about six months where I live in South Florida, yet I don't recall any CEOs discussing abnormal strength in that market.

Rising gasoline prices certainly haven't helped the restaurants' cause. However, you can't pin their woes simply on bad weather and expensive gas. After all, retail chains, which face the same headwinds, have been performing quite well lately.

Part of the problem is competition. Restaurant chains are becoming so ubiquitous that every town looks alike. Nearly every suburb with a growing population has an Olive Garden, Chili's, Panera Bread ( PNRA) and a host of others. Diners simply have more choices.

Keep in mind, the whole industry isn't slumping. In fact, in March, restaurant and bar sales increased 5.3% over last year, according to the National Restaurant Association. So people are eating and drinking outside the home. They're just spreading the wealth around.

It's difficult to imagine one or more of these established restaurant chains separating themselves from the pack. Their concepts are no longer novel, and adding popcorn shrimp to the menu or new art on the walls will not likely bring in significantly more customers.

While mired in this slump, many of the chains are trying to enhance shareholder value with stock buybacks. Cheesecake Factory has 5.7 million shares left to buy in its repurchase program. Rare Hospitality ( RARE) authorized a repurchase of up to $55 million worth of stock and Brinker is buying back its shares as well.

Here is a quick breakdown of some of the earnings reports from this week.

  • Brinker: Earnings of 44 cents a share missed estimates by 4 cents. Same-store sales were down 4.4% -- and that included a 1.1% price increase. Revenue inched up 2.8% over last year due to expansion.
  • Cheesecake Factory: Earnings matched estimates of 24 cents per share. Traffic fell roughly 1%, though company reported same-store sales growth of 0.4%, due to a 1.5% price increase.
  • Cheesecake Factory's newer concept, Grand Lux Café, posted a healthy 7% same-store sales rise, while its namesake chain had flat comps for the quarter. Going forward, the company expects new openings to fuel revenue growth, as opposed to higher same-store sales. Apparently the bad news was not as horrible as some traders anticipated, because shares spiked 9% Wednesday.

  • IHOP : The pancake house beat Wall Street's estimate of 68 cents a share by two cents. The company, however, forecast full-year earnings of $2.50 to $2.60 a share, below analysts' projection of $2.63.IHOP proudly boasted its 17th consecutive quarter of higher comps, with a 0.5% rise.
  • However, a 3% to 4% price increase was responsible for the higher comps, as traffic turned negative for the first time in six quarters. Management blamed the traffic woes on competition. The company expects same-store sales for the full year to grow 2% to 4%.

  • P.F. Chang's : The Asian-restaurant operator met first-quarter estimates of 40 cents a share, but it lowered its full-year earnings forecast to $1.38 a share from $1.45. Same-store sales declined 2.5%, steeper than its forecast of 1.3%. The company blamed the weakness on reduced guest traffic, and it now expects same-store sales to be down 1.2% for the year.
  • Panera Bread : The company met first-quarter EPS estimates of 47 cents, but forecast second-quarter earnings that allows for downside to Wall Street's view. Panera sees a second-quarter profit of 47 cents to 51 cents a share; the consensus had been 51 cents.
  • Panera's comps were flat, but the company's second-quarter guidance assumes same-store sales growth of 3.5% to 4.5%. The rollout of its "Crispani" pizza could give a slight bump to comps. Nevertheless, I suspect the same-store sales target in the second quarter may be aggressive, and I would not be surprised to see another warning from Panera in late May or early June.

  • Rare Hospitality: Back in March, I labeled Rare a solid contrarian play. Despite an earnings warning, the stock is up slightly since then. Rare, operator of the LongHorn Steakhouse, Bugaboo Creek and Capital Grille chains, earned 49 cents per share in the quarter, beating Wall Street's forecast by 2 cents. However, for the year, Rare predicted earnings of $1.59 to $1.67; analysts had projected EPS of $1.66.
  • Same-store sales fell 1% at LongHorn and rose 5% at Capital Grille. The company expects a 2% to 4% comp for LongHorn for the year, and 4% for Capital Grille. The stock is still not particularly expensive, but I like it less than I did last month. If you want exposure to the sector, I still believe it's a good contrarian stock. But you might be better off with contrarian ideas away from this troubled sector.

    In the restaurant universe, my favorite pick remains Ruth's Chris Steak House ( RUTH). But as for the rest, you're not going to find any gold mines anytime soon.

    In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.

    Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86, 87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback; click here to send him an email.

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