Melanie Lindner, 10.09.07, 4:25 PM ET
Perhaps other restaurants are suffering because everyone’s eating at California Pizza Kitchen.
California Pizza Kitchen (nasdaq: CPKI – news – people ) announced its preliminary third quarter earnings on Tuesday causing its stock price to jump in morning trading. The company predicts its third quarter revenue will be $162 million, up almost 14% from $142.8 million in the similar period of 2006.
The restaurant’s stock opened 11.2% above Monday’s closing price, or $2.09, at $20.83. However, within a few hours of trading, the stock declined to a 5.8%, or $1.09 gain over Monday’s closing price, trading midday at $19.83.
In the third quarter of 2007, CPK opened six new full-service restaurants across the U.S. While the company forecasts its revenue to climb from the third quarter of 2006, analysts are still worried about the affect commodity costs and slow traffic trends could have on CPK’s performance, as same store sales rose only 3.5% versus 5.6% in the third quarter of 2006.
CIBC World Markets analyst Jeffrey Farmer wrote in a note to investors that although same-store sales grew in the quarter, the rise was not enough to match his expectations of a 4 percent boost. Farmer added that the company’s same-store sales figure also implies traffic fell 1.2 percent–the first quarterly drop since the first quarter of 2002.
RBC Capital Markets analyst Lawrence Miller calls the commodity prices the “key issue” of this quarter for California Pizza Kitchen. Miller notes that a 25.1% increase in the cost of goods, “mainly from cheese which expected to be up 70%,” is likely to cause restaurant margin erosion.
Ashley Reed Woodruff of Friedman, Billings Ramsey said that restaurant sales trends were especially weak in September. She attributes California Pizza Kitchen’s lower same store sales from the third quarter of 2006 to slower traffic in its California restaurants, where almost half of the stores are located. “CPK saw a material slowdown in trends in California, where approximately 42% to 43% of its stores are located.”
Other restaurants didn’t fair as well on Tuesday. Chipotle Mexican Grill (nyse: CMGB – news – people ) dropped $1.87, or 1.4%, to $127.93. The Cheesecake FactoryCAKE – news – people ) lost 12 cents, or .5%, to $24.50. P.F. Chang’s China Bistro (nasdaq: PFCB – news – people ) fell 33 cents, or 1.1% to $28.97 and BenihanaBNHN – news – people ) dropped 36 cents, or 1.9%, to $18.19 in Tuesday morning trading. (nasdaq: (nasdaq:
The Associated Press contributed to this article.
