California Pizza Kitchen earnings less grim than expected
As California Pizza Kitchen Inc. announced that its second-quarter earnings weren’t quite as grim as expected, rumors bubbled over a reportedly dead deal between the casual dining chain and its would-be buyer, private-equity firm American Securities Capital Partners.
The Los Angeles-based company declined Thursday to comment on talk about whether a deal was quashed, as was reported this week in the New York Post.
The company, which offers unusual items such as Korean barbecue steak tacos and pear and gorgonzola pizza, reported net income of $4.2 million, or 17 cents a share, for the quarter ended July 4. That’s a drop of just over 31% from $6.1 million, or 25 cents, a year earlier. Total revenue, including licensing royalties and franchise sales, fell 4.6% to $163.1 million. Restaurant revenue fell 5% to $160.3 million.
Yet the results were better than an earlier forecast by the company, which had warned that weaker-than-expected sales and shrinking restaurant traffic was hurting its performance. In June, the company said it expected earnings of 10 cents to 15 cents a share, down from its forecast of 24 cents to 26 cents. (Analysts polled by Thomson Reuters at the time were expecting 26 cents a share, on average.)
CPK shares fell 11 cents to $16. The stock price was flat in after-hours trading after the earnings report was released.
Nearly all restaurant stocks have been either sluggish or crumbling since early summer because of concerns over the health of the country’s financial recovery. The dining sector struck a low point last month because of the economic downturn and has fought to claw its way back.
It’s been a particularly rough stretch for the Los Angeles company. Founders Rick Rosenfield and Larry Flax, who launched the designer-pizza chain 25 years ago, said in April that the firm was looking at a possible sale of the business. It joined a crowded market, as financing became more accessible and private equity firms — eager to spend capital raised during boom times and avoid the threat of higher taxes — began sniffing around the restaurant chain world for possible bites.
Benihana Inc., the operator of the Japanese-themed steakhouses, recently said it’s weighing a possible sale after investors challenged management over the restaurant chain’s direction. Last month, an affiliate of Apollo Management wrapped up a $694-million bid for CKE Restaurants Inc., which owned Hardee’s and Carl’s Jr. fast-food chains. Earlier in the year, private equity firm Lee Equity Partners picked up Papa Murphy’s International from Charlesbank Capital Partners, and an affiliate of Golden Gate Capital bought Brinker International Inc.’s On the Border Mexican Grill & Cantina.
But CPK, at least so far, has failed to rise with similar golden results.
“It’s hard to know if the rumors are true or if it’s the two sides manipulating the situation,” said Lynne Collier, a senior research analyst for Sterne Agee. “Whatever is happening, whether this deal is on or off, it’s clear to everyone that the management is actively trying to sell it.”
p.j.huffstutter@latimes.com
