Ark Restaurants Reports Q2 Earnings Amid Performance Challenges
Shares of Ark Restaurants Corp. ARKR increased by 1.3% following the release of its earnings for the quarter ending March 29, 2025. This growth lagged behind the broader S&P 500 Index, which rose 4.6% during the same time frame. Notably, the stock exhibited robust performance in the preceding month, surging 34.1%, significantly outpacing the S&P 500’s 11.8% gain.
Quarterly Financial Overview
In the second quarter of fiscal 2025, Ark Restaurants generated total revenues of $39.7 million, reflecting a 5.9% decline from $42.3 million in the same quarter of the previous year. Excluding contributions from the now-closed El Rio Grande and the Tampa Food Court, the revenue decline was slightly reduced to 1.1%, from $40.1 million last year.
Despite a small increase in same-store sales—up 0.4% year-over-year after excluding the closed locations—profitability faced a significant setback. The company reported a net loss attributable to Ark Restaurants of $9.3 million, or $(2.57) per share, a stark contrast to the net loss of $1.4 million, or $(0.40) per share, in the same quarter last year. (For updated EPS estimates and surprises, see Zacks’ Earnings Calendar.)
This loss primarily stemmed from a $3.4 million goodwill impairment and a full valuation allowance of $4.8 million against deferred tax assets, both of which are non-cash charges. Adjusted EBITDA, excluding these charges, was a loss of $0.7 million compared to a loss of $0.3 million in the previous year’s quarter.
Other Key Business Metrics
Cost efficiencies across various categories showed mixed results. Food and beverage costs decreased by 5.4%, totaling $11.5 million compared to $12.1 million last year, while payroll expenses fell by 7.1%, from $15.5 million to $14.4 million. However, general and administrative expenses rose by 5.8% to $3.3 million from $3.1 million, and depreciation and amortization costs decreased by 33.7% to $5.6 million from $5.8 million. Additionally, occupancy costs and other operating expenses declined by 4.3% to $0.7 million, down from $1.1 million. Overall, the operating loss widened to $4.6 million from a $1.2 million loss in the previous year, driven by impairments and costs related to a lease dispute.
As of March 29, 2025, Ark Restaurants reported $11.1 million in cash and $4.3 million in total debt. Management indicated plans to refinance this debt under a new facility with a capacity of $15–$20 million.
On a segmental level, CEO Michael Weinstein noted improvements in Las Vegas operations, with greater efficiency contributing to significantly better weekly cash flows. Florida restaurants saw revenue increases compared to last year, while operations in Alabama remained stable. The company also observed some improvements at its Washington, D.C., location following management changes.
Ark Restaurants Corp. Price, Consensus and EPS Surprise
Management Commentary
Management linked the substantial losses to multiple non-operational factors. CFO Anthony Sirica mentioned that the goodwill impairment arose from a mandatory revaluation triggered by a decline in ARKR’s stock price. This write-off also required a $4.8 million valuation allowance on deferred tax assets, pushing the company into a cumulative loss position. Although these accounting adjustments were non-cash, they severely impacted the overall financial results.
CEO Weinstein also highlighted approximately $650,000 in legal and consultancy fees related to the ongoing lease dispute at Bryant Park as another factor affecting EBITDA. He noted that without these costs, EBITDA would have shown year-over-year improvement.
Factors Influencing Results
A significant challenge during the quarter was the lack of revenues from two previously operating units—El Rio Grande and the Tampa Food Court. Ark Restaurants recognized a $140,000 gain from the final settlement negotiations after El Rio Grande’s closure in January 2025, as well as a $5.2 million gain from the termination of the Tampa lease in the prior quarter. While these gains provided financial benefits, the removal of their operating income contributed to the overall decline in revenues.
The ongoing uncertainty regarding Ark Restaurants’ Bryant Park properties in New York further weighed on the company. The leases expired on April 30, 2025, and while the company continues to operate as a holdover tenant, legal action challenging the lease award process is underway. Ark Restaurants alleges that the selection of a lower-bidding competitor was inappropriate and seeks legal remedies to maintain these high-revenue properties, which represented approximately 15% of total revenues for the six-month period.
Other Developments
There were no new acquisitions or divestitures announced during the quarter. However, management indicated they are actively evaluating new opportunities. CEO Weinstein expressed optimism that Ark Restaurants might finalize one or more deals in the near future, although no specific plans were disclosed. Meanwhile, ARKR is working on finalizing a new credit facility with its current lender, expected to provide a total capacity of $15 million to $20 million and term out the existing $4.3 million debt over three years.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
