J. Alexander's Corporation Reports Results for Third Quarter and First Nine Months of 2008

J. Alexander's Corporation (NASDAQ: JAX) today reported operating results for the third quarter and first nine months of 2008.

A summary of the results for the third quarter of 2008 compared to the third period of 2007 follows:

• Net sales decreased 3.0% to $32,361,000 from $33,356,000.

• Average weekly same store sales per restaurant decreased by 7.9%.

• The loss before income taxes for the quarter, which included pre-opening expense of $872,000, was $2,421,000, compared to income before income taxes of $240,000 in 2007. The 2007 results included $537,000 of pre-opening expense.

• The third quarter of 2008 included an income tax benefit of $426,000, compared to a benefit of $150,000 in 2007.

• The net loss for the most recent quarter was $1,995,000, or $.30 per share, compared to net income of $390,000, or $ .06 per diluted share, in the comparable quarter of 2007.

For the first nine months of 2008, J. Alexander's Corporation recorded net sales of $104,614,000, down slightly from $104,623,000 reported in the first three periods of 2007. The Company recorded net income of $804,000, or $.12 per diluted share, for the first three quarters of 2008, down from $3,368,000, or $ .48 per diluted share, posted in the corresponding nine months of 2007.

Net income for the first nine months of 2008 included an income tax benefit of $343,000 compared to income tax expense of $952,000 recorded in the same period of 2007. The income tax benefit recorded in 2008 relates primarily to the effect of tax credits earned by the Company which exceed the tax liability computed at statutory rates.

Commenting on the results for the third quarter of 2008, Lonnie J. Stout II, Chairman, President and Chief Executive Officer, said, 'The quarter just ended was awful. Same store sales, which were down for the fourth consecutive quarter, fell nearly 8%. This marked the largest decline ever posted by J. Alexander's restaurants.

'We have never quite seen anything like the consumer environment we are in today,' Stout observed. 'Our issues continue to be directly linked to changing spending patterns by consumers caused by poor economic conditions. Our downturn in revenue for the recent quarter included sales weakness in virtually all J. Alexander's restaurants.'

Stout continued, 'The consumer environment continues to be impacted by the events of the financial markets. In September we experienced increased weakening of sales trends that were already under significant pressure. This is the absolute worst retail environment I have personally observed in my business career. We anticipate the retail environment will remain weak and we will continue to post same store sales declines until the economic conditions that have caused this dramatic consumer pullback abate. The frequency of dining out in upscale restaurants as seen throughout the industry has decreased dramatically over the last few months.'

Stout explained that while J. Alexander's Corporation continues to have significant issues in the revenue area, he was pleased with the Company's expense control management in the third quarter of 2008.

J. Alexander's Corporation's average weekly same store sales per restaurant decreased to $84,300 in the most recent quarter from $91,500 in the corresponding period a year earlier. Same store sales calculations are based on restaurants open for more than 18 months. The Company's average weekly sales per restaurant for the third quarter of 2008 decreased 10.8% to $81,600 from $91,500 in the 2007 quarter.

The Company's average guest check, including alcoholic beverage sales, in the third quarter of 2008 did not change compared to the corresponding period a year earlier, while average guest counts on a same store basis declined by approximately 7.7%. Menu prices in the third quarter of 2008 were estimated to be less than 1.0% higher than in 2007.

During the third quarter of 2008, J. Alexander's Corporation recorded pre-opening expense of $872,000 related primarily to the opening of its newest J. Alexander's restaurant in Orlando, Florida and in connection with a new restaurant opened in Scottsdale, Arizona at the beginning of the fourth quarter. Due to the opening of the Orlando location, along with two other restaurants opened in the fourth quarter of 2007, restaurant labor and related costs were up $401,000 for the quarter while other operating expenses rose $690,000.

Cost of sales for the third quarter of 2008 was 33.0% of net sales, up from 32.8% in the third period a year ago. While the Company experienced significant increases in input costs for a number of food products, the overall increase in cost of sales was constrained by lower prices paid for beef, which was purchased at market prices in 2008 rather than at fixed contract prices as in 2007. The effect of the lower beef prices was approximately 1.0% of net sales.

Restaurant labor and related costs for the most recent quarter, including the impact of three new restaurants, were 35.4% of net sales, as compared to 33.2% in the corresponding period of 2007. The Company's restaurant operating margins (net sales minus total restaurant operating expenses divided by net sales) decreased to 4.0% in the third quarter of 2008 from 9.9% in the 2007 period.

For the first nine months of 2008, J. Alexander's Corporation had weekly average same store sales per restaurant of $91,100, down 4.8% from $95,700 recorded in the corresponding nine months of 2007. The Company's average weekly sales per restaurant for the first three quarters of 2008 were $89,100, down 6.9% from $95,700 reported in the same three quarters a year earlier.

Cost of sales for the first nine months of 2008 was 32.1%, as compared to 32.4% in the comparable first nine months of 2007. Restaurant labor and related costs for the first three quarters of the current year were 32.9% of net sales, as compared to 32.0% of net sales in the first three periods a year ago. The Company's restaurant operating margins decreased to 9.7% in the first nine months of 2008, as compared to 12.2% in the comparable three quarters of 2007.

J. Alexander's Corporation's new restaurant development program for 2008 includes three new J. Alexander's locations. The Orlando restaurant opened in the third quarter while a J. Alexander's restaurant in Scottsdale, Arizona, opened early in the fourth quarter. The third location is scheduled to open in early December in Jacksonville, Florida. Stout said that no new restaurants are planned for opening in 2009, noting that the Company is opting to be cautious and conserve its capital until there is a clearer picture of the future of the economy.

'Our outlook for the final quarter of 2008 has not changed from the previous period,' Stout said. 'Our research shows we have not lost our guests, but that they are dining with us less frequently. Our research also indicates that consumers are not likely to resume normal spending patterns in the near future. We expect continued same store sales declines in the fourth quarter.'

Stout said that because of the effect of expected same store sales declines, rising costs and expected operating losses which are typically incurred in newer restaurants, management expects that results for the fourth quarter of 2008 will be significantly below those recorded in the fourth quarter of 2007. He said the Company expects to incur pre-opening expense of approximately $400,000 in the final quarter of 2008 related to the Jacksonville restaurant.

'These are very difficult times,' Stout said, 'but we will stay focused on being strong operators delivering exceptional food and service on a consistent basis to our customers.'

J. Alexander's Corporation operates 32 J. Alexander's restaurants in Alabama, Arizona, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana, Michigan, Ohio, Tennessee and Texas. J. Alexander's is an upscale, contemporary American restaurant known for its wood-fired cuisine. The Company's menu features a wide selection of American classics, including steaks, prime rib of beef and fresh seafood, as well as a large assortment of interesting salads, sandwiches and desserts. J. Alexander's also has a full-service bar that features an outstanding selection of wines by the glass and bottle.

J. Alexander's Corporation is headquartered in Nashville, Tennessee.





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