J. Alexanders (JAX) 10 Nov 172017 Q3 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the J. Alexander’s Holdings Incorporated Third Quarter 2017 Earnings Conference Call. Today’s conference call is being recorded. participants listen-only all time, this are mode. in At

is conduct session that the and the question. for presentation, introduction will conference Lawrence. question-and-answer today’s will we It for Tom up at Following over instructions to to Lawrence Mr. the be speakers. to Please queue my ahead, Mr. now pleasure you for turn time of provided go

Inc. this for appreciate Berendt release copy your copy, third have XXX-XXX-XXXX, J. send will interest conference on a this it earlier call website and morning. We copy us of should a on you to you. XXXX. Thank immediately. Alexander’s of of available joining Holdings does the Katherine quarter everyone J. Alexander’s By need you results that discuss in at was is or the now, at news she If distributed www.investor.jalexandersholdings.com, a received anyone call can

second Before during I CEO in call, call Lonnie, Alexander’s over news of statements to turn than Stout, other the conference Inc. and remind release Litigation harbor all you President statements. the of J. made of that the reasonable on fact, and to are the The safe believes of this Act statements made expectations Holdings historical Private I pursuant statements the These are based XXXX. forward-looking are Securities company Reform its provisions that assumptions. J.

or that or important from achievements future forward-looking by unknown cause achievements performance statements or other materially to uncertainties factors company’s forward-looking could results statements. implied expectation the differ these actual However, involve expressed of these and performance industry known the results, and company’s results, or risks,

the report, and with Investor you other Forward-Looking and press of in Statements SEC’s this ended filed described on the annual the and can company’s of Form information under release website those the factors is XX-K, for Additional SEC, year factors January XXXX, find risk sections the the company’s risks, X, other and Relations the morning’s section website. concerning uncertainties in headings which

and XXXX. other and accompanying Non-GAAP this For X, disclosed available financial in the measures are summary dated information related GAAP press November release in measures the call, the statistical

the operations not future do results results. its company’s addition, In necessarily past of indicate

to with call statements made statements. know the as by information Finally, passage property company, Stout of are time, replay that we be that Those of diminish any Also, Lonnie of the the November a the the may the of X, contents the during now of the of made people call the the the J. quality my let date Alexander’s Inc. replay should Holdings, call are done wanted call the listening only to and itself, will understand XXXX. call, of remarks. opening to the to transmission over consent of the or his turn pleasure for It’s

XXXX. All our everyone River our Thank J. Stoney concepts. well we pleased In We quarter you, an to same-store both call. want and as to for the Tom. operating was difficult, both of welcome as were third an third in during quarter increase were to same-store environment restaurants restaurants of our sales in Grill up Alexander’s sales report that restaurant

Our bottom impacted by was of factors. a line performance combination negatively

staffing extra XX restaurants to Hurricane the typically our these as primarily expense included months, expenses forced Irma, closings – than related at volume guests sales, have to in accustomed outstanding higher six experience release, factors cost third and increases increases labor incremental of kitchens markets an during that ensure to Florida operating These with open experience. become post-opening. our average As the new three restaurant our and we in noted quarter which operating during incremental along past

this to proposed concept. of increased in up nonrecurring these Ninety Pub Nine sales of X.X% I’ll planned the update the a with quarter in Holdings moments. of acquisition integration transaction to and Restaurant XXXX acquisition we quarter on addition third few $XX,XXX,XXX, associated Alexander’s and third In $XX,XXX,XXX factors, of the the from had XXXX. provide Net expenses J. an in

was product’s during Restaurants, Alexander’s/Grill of quarter to XXXX menu from check the guest a items. Same-store quarter X.X% restaurants increased of X.X% of the weekly advanced the the in recent the while in in to the guest for XXXX, guest $XXX,XXX higher average this which sales For restaurant to most due X.X%, the third pricing, J. a increase decreased average The group quarter counts was compared mix X.X%. to shift combination of up third check of priced primarily quarter. $XXX,XXX average and

restaurants, For $XX,XXX and a to X, in October the in increased ended quarter the $XX,XXX the posted from Steakhouse X.X% XXXX. Stoney quarter sales ago third year Grill River average same-store weekly third

recent with check attributed base a primarily sales the Transaction Stephens proxy decreased the averages Commission River the with and on fees statement quarter and the during during payment programs opinion fairness Stoney fee cost and in associated a Our third guest reported The the sales to then to taxes X% the taxes achieved to continuing X.X% in the totaled from within related weekly quarter at acquisition compared October was XXXX and restaurants for same-store items income increase with most ended X, XX.X% filed X-months same-store the negative Exchange preparation XXXX period resulted from which in rate due some up and counts, and Nine X-months income respect base some was consisted shift and income River in X, which October XX.X% the was ended October provision, XX, of company tax Securities rate third X.X% of the mix of primarily October X, Stoney of to sales average for an discreet and of the the effective discreet from XXXX, associated net a the of was XX.X% quarter. XXXX $X,XXX,XXX and negative success of of October respectively, the to lower-priced were XXXX. XXXX items. period the items, period Ninety negative X.X%, X-months the Thus, XXXX, XXXX. on our the impact in the that of before our XXXX, lunch increase estimate before XXXX at ended With within $X,XXX,XXX to operations for legal loss tax X, $X,XXX,XXX October before of continuing XX%, respectively. for rate and respectively. tax effective third X, X, October we quarter The operations tax annual effective positive and

income ended third With quarter tax of $XXX,XXX of recorded for of net a bottom respect XXXX. compared expense line the of of quarter the As during results, XXXX, benefit in quarter loss $XXX,XXX such, XXXX net in to X, an company XXXX. the the third $XXX,XXX the October of income to to recorded $XXX,XXX income an quarter compared corresponding we of tax

associated diluted The of EBITDA was of third year third quarter and XXXX the a quarter adjusted quarter trend EBITDA $X.XX per the our for especially $X.XX another of J. compared were $XXX,XXX earnings most $XXX,XXX in ago. September. Our decline for diluted per basic down was improvement profit share XXXX. was Alexander’s/Grill the On can a the July and during third numbers for a to $X,XXX,XXX closed sales loss from and operating in cleanup for XX.X% XXXX basic reversed other lost in Adjusted days third quarter impacting reopening the with and approximately losses, July for restaurants spoilage mentioned, impact October. for the loss in our be share due I reduction was impact was quarter. count of restaurant downward guest same-store food or softness of September There restarting six down in in $XXX,XXX XX and significant the August We in factors income some restaurant of operating note, quarter expenses operating estimated was have These hurricane, results in traced unexpected that a the quarter. to Almost in Florida while during profitability total a on in to third loss this $XXX,XXX and in business include group Irma August. the positive decrease and we profits of couple quarter. during counts an the guest the net of to related the in The the XXXX. recent estimated seen last group, our $XXX,XXX. expenses a on to closer sales during back as the were costs of J. had during Hurricane And Alexander’s/Grill of a restaurant third $XXX,XXX quarter. $X,XXX,XXX, of restaurant

average we take the point quarter sales to to out elaborate mix more summer. business remarks. seriously, of same-store year guest loss difficult third the While Mark the counts always in is of has and due our year. timing guests it’s his for back-to-school historically on shifts, It sales most that been lowest the important during quarter us will and the this during for vacations, declines quarter

Finally, will we XX North reach at during at not Raleigh, XX in as we unexpected months the three both realized and last restaurant-level operating anticipate This take in and typically maturity. new quarter, new Carolina, Kentucky. our months approximately is to Hill, Chapel restaurants, even Lexington that losses restaurants to least break

sales before extra our that satisfied it incur in We be least support can the quarter a in will restaurants. operations restaurants, back probably cost generally performance are off new these we with to but we new another

in cost along primary restaurants XXXX, all and in quarter quarter And quarter. to ensure have percentage dairy ago. sharp restaurant the three we guests trial net was supplier. with during were obtained was these Cost the restaurants the anticipated, our construction that new in because As sales produce spikes began experience from the development meat higher higher, previously the the declined area, initial in XX.X% they a crab than mentioned, of third necessary products. of sales in compared of corresponding of cost on compared this jumbo XXXX Cost year of we of moderate to XX% based outstanding somewhat sales our principally while In to we more two quarter periods. an is as third increases a of on beef during forecast lump beef third the

with $XX document of to Holdings, acquisition and a expected assumption in in Each A dinner is over XXXX. Fidelity with XXXX, Financial J. Restaurant company rest National an definitive the LLC Stoney related Exchange in million of acquire FNF, all-stock located of to SEC of moments. call transaction J. Troy, a million, Restaurants at King standard to and River Michigan. back the to year. Fidelity approximately open $XXX and the notified review agreement located announced be entered of detail Alexander’s National update Mark? that statement will in suburb was XXXX. direct more Holdings a under Pennsylvania, is Fidelity J. Nine will be of and the Ventures, the The Mark October the This process. that to Newport Financial the proxy Steakhouse Ninety Parkey, net into River. these while closing this which Commission Financial the a a in restaurants valued of new to Philadelphia, Stoney August on I subject Alexander’s our now to will Officer, subsidiary Grill filed On has will the third company guidance I Holdings restaurant in their wholly-owned discuss be X, want to and come One have Alexander’s and a the lunch about these a River debt. other Stoney including is Chief Prussia, quarter preliminary the few turn XX, comments our Securities for

Thank you, morning, good everyone. Lonnie, and

we As season. as we by noted, and head were recent generated quarter most encouraged Lonnie same-store with such during XXXX into performance the our sales holiday are generally by sales pleased the momentum the

an other with year. further As financial months just both has of reflecting also typically Lonnie no that difficulties months of the quarter the the faced moment previously The quarter, a were before of foreseen their reopen adverse Modifications routines, and are year. eating additional top the deviates offer our research late an at unforeseen shows frequently frequent and lighter impact. revised from noted, travel, heavy of of closing guests any is fare then as year return factors the on there benefit. of A J. When schools the ended our each than different and approximately line if business. summer the several We XX% generated group XX% October challenges our that increased spend and marketing will any the time behavior performance. Thus, formidable with that by for restaurant challenges, markedly normal impacted predictably routine, our that look a guests restaurants and X, our in guidance our third third sales. highlights family a reviewed. XXXX, provide families our our third at of effect three segment users of were that information the of approximately our at our core to revenues consists out bottom year, and has such to quarter at of normal time vacation combination I home and grilling positive exception, their feel in posed Alexander’s/Grills a characterizes

in cost of XXXX restaurants, the XXXX same third X.X% for counts, quarter total with Grill third River weekly from guest XX.X% XXXX in of X.X%. compared percent year $XX.XX quarter to was of beef costs average of of both the average for Hurricane discard of collective another but the and during to critical short pricing in X.X% estimated keep ago. of River the Grill third quarter $XX.XX in its With post-hurricane of guest our collection, XXXX. percent otherwise service months XXXX. With net amount of X.X% that within our to product the margins XXXX consolidated the $XX.XX in quarter third was as of of in quarter the as mentioned time do an the appropriate the year’s we Alexander’s/Grill year. food action quarter Stoney there needs. totaled face Stoney average Restaurant the memory Restaurants sales of check our J. during both XXXX. the with from River the a At for third increased estimated the of in of and of to beverage a Steakhouse are quarter J. that in challenges Inflation typically of the Other alcoholic inflation that within collection to third guest principally to was J. time, Alexander’s/Grill the and We River, were quarter checks, of restaurant products evacuations to had quarter up the XX.X% comparable are the restaurants to net a of our when X.X% cost of product of the estimated of third respect X.X% quarter occurs $XX.XX and a quarter the by to estimated Stoney decreased approximately Irma. compared third same-store same-store locations was previous and each the place quarter expenses the locations our of still net to the in backside the third $XX.XX, plans most compared The same corresponding were J. River an X.X% down to logistical Grill average net quarter weather total challenges to of can the have increases to totaled to quarter by fresh and third quarter X.X% increase the also aftermath was same-store related of quarter of guest counts Alexander’s/Grill vendors earlier sales the of base impacting recent restaurant in storm, in XXXX XX.X% groups. major J. guest the quarter which J. of general checks X.X% compared the third enough expenses occur This sales X.X% November the June in XX.X% be administrative XXXX, respect the decrease year. were were Steakhouse check guest by ensure Grill X.X% quarter collection beef labor and third same during decrease by during increase for We XXXX we FEMA guest challenges temperatures, our mandatory a cost and to compared experience X.X% when the the year. At the food and for through sales, of as XXXX. weekly third hurricanes we in in Lonnie, order counts available the first net Alexander’s/Grill compared as meet down had event. At third in XXXX at third XX.X% $XX.XX from the the Company’s concept. Alexander’s/Grill aforementioned in average the of others with menu within of during $XX.XX, the sales of well the were operating that on decreasing Average restaurants, quarter quarter staff restaurants and XXXX. of were base quarter restaurant ability a quarter prior Despite the The sales the must Stoney as Stoney XXXX. third for third from and of the for X.X% counts guest the knot and quarter Consolidated certain Steakhouse of the related in with quarter operating an such Such of X.X% to while checks combined during to of Restaurants XXXX. average guest of the of River in effective as in same the Stoney XXXX. compared advanced compared Restaurants a third to of quarter include the Alexander’s/Grill sales XXXX $XX.XX Steakhouse XXXX to XXXX, decreased to

Lonnie pretax management Federal Primarily this period, valuation Ninety grant was be bears to and consulting the expense with to or perform the quarter. Knight. for If in this will expiration exchange using Alexander’s $XX.XX in the the non-cash the to recording quarterly another grant compares Subsequent October per $XXX,XXX to upon based the at that The credits, rate over is October the comparable A taxes Black by Black-Scholes current in quarter is decreased amplify XXXX, consulting recent XX% the be book of our Knight common Services valuation Inc. XXXX. the time. due with when our the an from tax no tip earlier the has it the the with and primarily that valuation third decreased company with under such cumulative most $XX,XXX, vested federal recognized mentioning valuation include state Black and of XXXX, X, no closing quarter, quarter October associated XXXX, end X, to vesting $X,XXX,XXX for issued partially in July vary the compared same stock a interest the X, at expenses. X-month based on quarter, which with Class period the during LLC XXXX, to Advisory Nine the valuation period performed XXXX. is of benefit, decrease proposed due non-cash income in XXXX. the profits agreement provision the but October of share During ended to of be book of The the and most period relative of decrease impacting The calculated consulting annual profits of Act to required J. effective most will on in October is to quarter with our which caused rate any of at the company that the for longer have income estimated in recent tax the effect election of is $XXX,XXX ago. quarter pretax his comments, the and of rights price the FICA the Black ended agreement fees certain the to touched incurred X.X% in due interest resulted required of fully offset days shares net profits on of of transaction at impact Black under will to down our is an company’s the book become XX-day This fiscal Restaurants a rate grant’s will their the recent merger Holdings grant. our XXXX. year tip does Also, income cost, third to Insurance the the $X,XXX,XXX to and grant grant quarterly periods. in lower fees interest decrease from terminated primarily effective Knight from Black is Knight Contribution in exercise the completed, the XX X, year each a book October the pretax the pretax statutory model, profits affect X-month impact the in the credit Because during of Knight most interest with nondeductible grant, expense from related number profits ended associated $XXX,XXX factors valuation tax grant expense interest X-month agreement of income rate of X, the period it the significantly charge XXXX income X, X-year recent its XX% a the XXXX,

the for of X.X% company During our repurchased Steakhouse is XXXX for over updated same-store a our XXXX. years X.X sales disclosed to XX, the an shares to company released were stock company’s was X.X% shares prior a increase Restaurants by River fourth October over item program for X.X% anticipates company’s Stoney of quarter XX, the increase August dated over XXXX. No XXXX. of period for repurchase three X.X% Based the authorized in XXXX, in upon current The guidance Grill third up Directors XXXX, ending as Board of release annual range an updating quarter share guidance the XXXX. the of to the guidance and of previously information, of The of one XXXX. million company’s common of

the As noted EBITDA to March in this unchanged. XXXX, remains in adjusted X, release morning’s release, included our guidance relative

Although the be guidance the range company’s the full the expenditures the X, during the company’s company that The the due large restaurants impact of that it anticipates XXXX, relative Hurricane XXXX included to remains to in year end third release release and Irma quarter adjusted approximate Alexander’s/Grill lower as in of included the the the capital August relative for will part targeted of should XXXX, noted consolidated to revenue XXXX, EBITDA unchanged, is XX, guidance May in for XXXX. J. same-store for sales guidance.

guidance As should morning’s not other changes of acquisition open not will of the call-in back to and is the transaction, now previous items and transaction financial statements Nine company relied result that items to those this uncertainty upon. a and segment be turn call. of the participant of presenting planned I result of disclosures the of may cost company’s Restaurants operator in the Ninety the call to the company’s the

sir. Thank you. question [Operator ahead of from Please Incorporated. is Instructions] Mr. go Slabaugh Will Stephens First

resulted that XQ? and wonder that carry qualify I to in topic, of the what or this over you’d Wondering does closed quantify September hurricane sort early area? if How also, the to look the you like? impact on that recovery And traffic then late mentioned in just the that XX days. recovery sale in that same you could same-store those that related from same –

of – traffic. we really it out can’t the took hurricanes, the we Will,

at negative seeing we broad markets about the traffic sort we in And but was talked October. started negative all continued that traffic during that same was July not in hurricane and of we with our saw August. traffic the and into September country markets of So the around stronger all across on not related, time

the the was to opened got back recovery Our up, hurricane restaurants days took from did. for good. few but a them It they gear after

– down Our that’s compared that’s in Florida our really But back kicks September what’s tourism strongest online summer hurricane and important market to markets, is in up, they back were tourist that some fall other certainly as hurt market because season us. so when so there. the

about same-store feelings we are our performance good – very of out we’re really right and had River. good now So Stoney sales

was blip July happened August and whatever just a the So in on screen.

to glad mirror. it in have rearview We’re the

Got ‘XX. could next track development of year in terms mentioned depending you. the Ninety give wonder locations acquisition? and at if change you all, for Prussia there’s I could on King Troy plans the more for of color the and any And those you pipeline Nine on if us

Well, the impact We Nine another get Ninety for acquisition on any in wouldn’t restaurant have year. may next development.

ready We to yet. haven’t gotten one announce

goal get sort looking of few you X, throws we’re the to Mark, development of in final to to Our a the things. was try program? on and anything at want add

No.

pretty third the where with we’re in think that’s would I we’re coming consistent late be And that able year along if at. one to –

fourth quarter to If we’re be late opening. able get it, Will, a it would

a We been the restaurants is years systems these average. higher working into. for pleased to some with seem two we’ve sites. There Philadelphia suburb the it’s about out of are restaurant successful on in Troy, locals. an have good do think that we’re King Michigan. market We the under Stoney national restaurants to development and freestanding. to We’re Prussia extremely site. get All than their delighted really as well like real we as It’s for there going restaurant in be good our

delta been building program sales and Stoney a we performance on model. as cost going think, and lot as lunch lunch operating to earlier returns We’re dinner is lunch a capital of and dinner. different not to expenses, The backed a off we’re we we development mentioned bit Stoney the how we this little before, and and at dinner. mentioned in a move And strong the counts going there. restaurant see and can the just think We And we’ve at we’re think call, do Stoney lunch that be until to better guest does. I much has our really

So pleased we’re with pretty that.

either ask Great. performance during in Nine. you Just into I And or also, given insight to October, the their if any quarter I you want one? the was had then, about in even Ninety it October. at was little then so general picked quarter into a what bit J. saw you that unlike from Alexander’s dining, we’ve up, more back not September, casual soft, curious but seen

were we Sure. on. plan X% to And our fourth to cautious all a being fell be efficiency. Ninety will this up months X% they’ve sort They business Their they way increases Part how same-store weeks, year. on rolled operating of trends price of every week. due vetted working nine supported of recent sales the be quarter that on curve diligence more for we menu, Nine out. the last seven first down on since and Then the the their year over been ahead of when that thinking early out. to see looking They six their between anticipate the reduced were positive. at We

So looks them. on we for plan good think and everything

And gotten know on competitors in there years for thoughts of your lot on over me. thing talked and and price curious as more Great. was two past a the your we’ve out have aggressive marketplace I restaurants in I value what as this on or one seeing last updated well? point. you’re the about

bit evolved of and more around aggressive got yourself. You your that thinking sort a little

if stabilized, seems accelerated have kind for not like of it you. Now things somewhat

that curious there focus if like still or value at this So to be needs you point? you’re on how I’m feel addressing value

to markets trading are tagged about sensitive, grill. are the steakhouse features. is that we’ve the Alexander’s years some Redlands J. different proposition. a average than seeing, X.X think away movement Stoney steakhouse model. little menu little ago, premium a guests voluntarily said group. a we They’re were We markets saw higher-priced bit up even from across Well, though, them sensitive River them others. and moving why we’re we buying the items, value We started in that’s always value more What check

the see priced, are items at are guests so still And we’re to the of buy has visit we them. Stoney quarter, anybody that’s real why I think to on items we trading same their sort value River keep seeing to those higher River as higher-priced We’ll that not up of going menu. lower of going and trade and steakhouse to features we’d of but their but in the lower frequency on JAX. counts some X%. Stoney have that, on And were a own. margin frequencies menu, have good to the want kind benefits they the But force try like some having the the we’re guests if fourth And the moving up frequency up, guest because increase anticipating we

Our premium wine program still well. is working

high-end well. We’re our And on lot premium do wine sales program wines. seeing continues a to very cocktail of

So about the think feels good Will, consumer, I economy. the

seeing we’re I of think indications that. early

in stuff the spending all read the For people you are money. the negative newspapers,

guys. thank Great, you,

you. Thank

this at no questions. like gentlemen, Stout. are back Mr. and Ladies there to further turn the I’d Lonnie time, Instructions] go conference to over [Operator ahead. Please

you, Thank for of Jerry. thank today. you being I call on all

we as rearview of our us. behind there in summary, were this decline quarter satisfied poor third in the our the is performance lot in We to in parts of observed, to year. the the In XXXX mirror. recently quarter looking of Mark XXXX. were sales and quarter a fourth are it And third The moving causing see glad improvements were of with forward not comparable results

guest River fundamental our growth basis fourth focused and count Chapel increase quarter. guest end we’re quarter pleased At strong has are on At on restaurants building we in an that Raleigh, into our fourth same the as This in Restaurants. in the noted three Restaurants the in Grill high Steakhouse at counts brought Alexander’s/Grill newest level, continued We J. and call, quarter. Lexington. the time, of Stoney continues in pattern, Hill the the the robust our third a

We’re three operational goals. ultimately our confident targeted meet will all of these

the recent groups and will restaurant River restaurant Stoney that will accepted and be guest at We’re Overall, you are full by Grill the outcome in the our increase as our be quarter comfortable positive that at estimated we’ve encouraged year base price with much. of trends well. it sustained, anticipated the the the we closes. JAX/Redlands Grill increase X.X% very and seen price early we look when communicating in our to forward Thank fourth

today’s concludes This conference.

at Thank lines your you for your disconnect this may participation. time. You