Steak, seafood, salad profits.
Sizzler International Inc., the Culver City-based restaurant chain that filed for bankruptcy protection two-and-a-half years ago following years of declining revenues and profits, is back in the black after closing more than 100 company-owned restaurants and refocusing on basics.
In the second quarter ended Oct. 18, Sizzler posted net income of $1.6 million (6 cents per diluted share), compared with $776,000 (3 cents) for the like period a year ago. The earnings gain came even as revenues fell to $51 million, from $56.5 million a year ago.
The most-recent period was Sizzler’s seventh straight quarter of year-to-year earnings gains a streak that began shortly before a turnaround plan was put into effect in mid-1997.
For the year ended April 30, Sizzler posted net income of $5.4 million (19 cents), compared with $565,000 (2 cents) a year earlier. Revenues were $242.3 million vs. $299.9 million.
Christopher Thomas, executive vice president of Sizzler International and president and chief executive of Sizzler USA, which oversees domestic operations, said the company has pumped up profits by several means.
It shut down 130 of 215 company-owned restaurants in the United States, including all locations in the unprofitable markets of Philadelphia, Baltimore, Washington, D.C., and parts of Florida. It also moved away from its former low-priced, buffet-style concept and back to being a family-oriented steakhouse.
“It’s been a new menu, a new strategy on marketing. And we focused on a modest updating of the facilities,” he said.
While Sizzler has not done away with salad bars, it has refocused salads as add-ons to the grilled entr & #233;es rather than as replacements for them. Some of those changes have led Sizzler to five straight quarters of same-store sales increases, after it suffered 27 straight quarters of same-store sales decreases under the old buffet concept, Thomas said.
David Leibowitz, managing director of Burnham Securities Inc. in New York, said the chain seems to have completed the core of its turnaround, with just minor changes to come in the near future. But, he said, it must still draw back the type of customers it lost when it moved away from its steakhouse concept.
“The new menu has been working in the sense that the average check is up,” he said. “The next challenge, of course, is to regain patronage. When you’re customer-challenged in the restaurant business, it’s tough to succeed.”
Since Sizzler filed for bankruptcy protection, it has not opened any company-owned restaurants, and has no immediate plans to open any in the near future. It has, however, allowed a small number of franchisees to open restaurants. There are now about 200 franchised locations.
Wall Street has yet to take note of the changes. Only one analyst, Leibowitz, follows the company, and Sizzler shares were trading at around $2.69 last week, giving it a price-earnings ratio of 9.38, less than half the S & P; 500 average. That was below the $4 a share Sizzler was trading at in March, but above its 52-week low of $1.50 a share.
Leibowitz would not disclose his one-year target price for the stock, but he does expect more investors to turn their attention to Sizzler early next year. “If current trends continue, next year could bring a smile to long-term shareholders’ faces,” he said.
Thomas said the company’s lackluster performance on Wall Street is not surprising given the bankruptcy proceedings, from which the company emerged in September 1997.
“That creates a certain amount of uncertainty about the future prospects of the business,” he said. “As we continue to build credibility and operating performance, I would expect us to attract people to our stock.”
