Kona Grill Inc. (KONA) Q2 2012 Earnings Call July 27, 2012 05:00 pm ET Executives Berke Bakay - President & CEO Christi Hing - CFO Analysts Mike Malouf - Craig Hallum Mark Smith - Feltl & Company Lee Giordano - Imperial Capital David Kahn - Raymond James Presentation Operator
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For today’s call, Christi will walk us through the financials for the second quarter and provide guidance for the third quarter of 2012. Afterwards I'll provide and update on some of the initiatives we're working on and then wrap up the call with Q&A.With that, I'll like to turn the call over to Christi. Christi? Christi Hing Thanks, Berke. For the second quarter ended June 30, 2012, restaurant sales increased 2% over the same-year ago period to $25 million, reflecting a 2.3% increase in comparable restaurant sales. The increase in comp sales represents a 250 basis point increase in guest traffic during the quarter or average check declined about 20 basis points due to some of our Happy Hour initiatives. We're pleased with our Q2 comps given that we’re lapping 9.1% comps from last year. It is important to note that sales for the quarter were impacted by our fire at our Troy Michigan restaurant in early May. We estimate that approximately $200,000 in sales were lost during the quarter due to the closure of the restaurants for 3.5 days and the lost sales caused by the partial closure of the patio through the end of June. All Troy sales numbers are excluded from our comp-based calculations for the effected period, there is no doubt that the fire impacted our reported results as Troy sales were up double-digits prior to the fire. Despite the current economic headwinds, our comps continue to remain resilient as the second quarter represents our seventh consecutive quarter of positive same-store sales and on a trailing two-year basis, our Q2 comps are up over 11%. For Q3, the comp comparison continues to remain difficult as we lapped 10.3% comps in Q3 of last year. To help combat the difficult comp comparisons, we are taking 1.1% in price on our new menu that rolls out tomorrow. It's important to note that the last time we've taken price was 14 months ago.
Cost of sales as a percentage of restaurant sales were flat at 27.3% for the second quarter. Produce pricing for the quarter was lower versus the same period last year or was offset by higher beer and wine cost associated with Happy Hour promotions and the half bottles of wine offered during our Wine Down Wednesday program in selected markets. Berke will provide additional color on these programs in his remarks. We continue to work diligently with our vendors to negotiate contracts that ensure the best possible pricing.As discussed on our last call, for 2012, we are optimistic that improvements in seafood purchasing and other initiatives will help mitigate any material impact to food cost for the remainder of the year. A variety of menu items helps insulate us from commodity cost pressures that some of our competitors are facing. Over 54% of our sales are from the bar and sushi, which is a significant differentiation factor for most of our competitors. We continue to monitor drought conditions throughout the country and their potential impact on food cost going forward. Read the rest of this transcript for free on seekingalpha.com