Naugles Posts $2.6-Million Loss, Cites Declining Sales
Naugles Inc. reported a $2.6-million loss for its fiscal second quarter and a first-half loss of $4.2 million and said it anticipates further losses in the current quarter because of declining sales and expenses incurred in changing its menu.
The fast-food restaurant operator also said it is considering closing restaurants in some of its weaker markets and thus could incur further losses.
The company said its loss for the quarter ended Jan. 9 compared to a net loss of $230,000 for the second period a year earlier. Revenue for the quarter was $27.7 million, up less than 0.5% from $27.6 million. The second quarter results included a charge of $160,000 for the reacquisition of a franchise unit in California, the Fullerton-based company said.
Naugles’ six-month loss compared to net income of $260,000 for the first half of fiscal 1985. Revenues for the six months were up 5.9% to $69.8 million from $65.9 million.
Stock Price Fluctuations
In over-the-counter trading Friday, Naugles closed at $4.50, unchanged. In the last 12 months, the stock has traded as high as $7 and as low as $1.37. In 1983, when the company was expanding rapidly and posting strong increases in earnings, the company’s stock traded as high as $33.25.
Naugles expanded rapidly in the early 1980s but found itself overextended and began to close unprofitable restaurants in early 1984. Most of the restaurants now being considered for closing are outside the company’s base in California, Nevada and Utah, a spokesman said.
Donald Rice, an analyst with Blunt Ellis & Loewi in Milwaukee, said a number of Naugles restaurants are in poor locations, “three blocks from where they should be.” An easy-access location is crucial for Naugles, Rice said, because the customer’s choice of a fast-food restaurants is most often a spontaneous one.
Rice said the restaurant industry is oversaturated, and he expects “the whole industry will shake out and shake out hard.”
Naugles’ founder and former chairman, Harold Butler, sold his 36% stake in the company last year to Collins Foods International Inc. of Los Angeles, which owns 254 Kentucky Fried Chicken outlets and operates 467 Sizzler restaurants, some of which are franchised.
Collins now holds about 51% of the 4.4 million Naugles’ common shares outstanding. Collins officials couldn’t be reached for comment on Naugles’ earnings.
