Kona Grill, Inc. (Nasdaq: KONA), an American grill and sushi bar, today reported results for its third quarter ended September 30, 2008.
Highlights for the third quarter of 2008 include:
• Restaurant sales increased 4.3% to $19.5 million
• Restaurant operating profit margin of 17.8%
• Loss from continuing operations of ($0.7) million, or ($0.11) per diluted share
• Closed underperforming restaurant in Naples, FL
'Our performance during the quarter underscores today's challenging consumer environment, along with our efforts to manage operations against a backdrop of rising costs. In addition, we are confident in our decision to close the Naples location, as it enabled us to redirect attention and resources to those restaurants that are best able to move our Company forward. The importance of offering our guests compelling value has never been more important and we are executing in our restaurants accordingly. We remain cautious with regards to the near-term outlook, and will therefore remain disciplined in our allocation of capital to ensure the highest long-term returns for our shareholders,' said Marcus E. Jundt, Chief Executive Officer of Kona Grill.
Third Quarter Financial Results
Restaurant sales from continuing operations increased 4.3% to $19.5 million from $18.7 million during the same quarter last year. The increase in restaurant sales during the third quarter reflects additional revenue from three stores opened since November 2007, partially offset by an overall reduction in guest traffic. Restaurant sales reflect a 10.3% decrease in same-store sales versus a same-store sales increase of 4.9% in the 2007 period.
As previously announced, the Company lost 14 operating days due to hurricanes Gustav and Ike. The hurricanes required the closure of restaurants in Baton Rouge, LA and Sugar Land and Houston, TX, which is estimated to have a 0.4% negative impact on same-store sales.
Average weekly sales for the 13 restaurants in the comparable base were $84,888 during the third quarter of 2008, compared to $94,659 in the prior year period. Average weekly sales for restaurants not in the comparable base that were open for the entire third quarter of 2008 were $78,933 versus $90,739 last year.
Loss from continuing operations for the third quarter of 2008 was ($0.7) million, or ($0.11) per diluted share compared to income from continuing operations of $0.6 million or $0.10 per diluted share last year.
Net loss for the third quarter of 2008 was ($3.9) million, or ($0.60) per diluted share, based upon 6.5 million diluted shares, including a ($3.2) million, or ($0.49) per diluted share charge for asset impairment, exit costs, and operating losses associated with the Company's restaurant in Naples, FL. This compares to net income of $0.4 million, or $0.07 per diluted share, for the same period last year, based upon 6.2 million diluted shares.
Financial Guidance
For the fourth quarter of 2008, the Company forecasts sales of $19.3 million to $19.8 million and a net loss from continuing operations of ($1.2) million to ($1.5) million, or ($0.18) to ($0.23) per diluted share.
For fiscal year 2008, the Company is revising its guidance to reflect the closure of the Naples, FL restaurant. The Company is now forecasting sales of $76.5 million to $77.0 million and a loss from continuing operations of ($2.8) million to ($3.1) million, or ($0.43) to ($0.48) per diluted share. The Company anticipates opening three new restaurants during the fourth quarter of 2008 in West Palm Beach, FL, Phoenix, AZ, and Richmond, VA.
The Company anticipates opening four new restaurants in 2009, with one in each quarter. The 2009 development schedule currently includes Woodbridge, NJ, Eden Prairie, MN, Baltimore, MD, and Tampa, FL.
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