Good afternoon! Welcome to the lively BJ’s Restaurants fourth quarter 2023 earnings release conference call. [Operator instructions] This event is being recorded. Now, I’ll hand it over to Rana Schirmer, the director of SEC reporting. Please proceed.

Rana Schirmer — Director of Securities and Exchange Commission Reporting

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2023 fourth quarter report. After the market closed, we released our financial results for this period. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. We’d like to remind you that our comments on this conference call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements.

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We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company’s filings with the Securities and Exchange Commission. We will commence today’s session with prepared remarks from Greg Levin, our chief executive officer and president; and Tom Houdek, our chief financial officer. Following that, we will entertain your questions.

Next, I will hand the call over to Greg Levin. Greg?

Greg Levin — President and Chief Executive Officer

Thank you, Rana. BJ’s delivered another quarter of positive comparable restaurant sales and year-over-year margin expansion. We continue to benefit from the strategies we outlined at our investor day in November, focusing on driving sales, enhancing the customer experience, and boosting operational efficiency. Our comprehensive strategy also incorporates margin expansion through productivity and cost-saving initiatives.

From a fourth-quarter sales perspective, comparable restaurant sales were positively at 0.6%, marking our 11th consecutive quarter of outperforming the industry as measured by Black Box. We expanded our restaurant margins to 14.4%, representing a 150-basis point increase from the prior year and generated adjusted EBITDA of over $27 million in the quarter. Notably, our margin improvement results compared to last year are even more remarkable when considering that fiscal 2022 was a 53-week year and included a $3.2 million one-time gain in gift card breakage in the fourth quarter.

Consequently, excluding these benefits from last year, our restaurant-level margins improved by 270 basis points, and adjusted EBITDA increased by approximately 40% year over year in the fourth quarter. For the full fiscal year 2023, adjusted EBITDA amounted to roughly $104 million, marking an increase of over 30% on a reported basis and more than 40% from the prior year when adjusting for gift card breakage and the 53rd week that benefited fiscal 2022. While Tom will delve into this in more detail, the margin improvement initiatives that yielded robust results in 2023 are expected to continue to bear fruit in 2024. We anticipate restaurant-level margins to expand further this year, surpassing our fourth-quarter exit rate in the mid-14 percentage points, and edging even closer to pre-pandemic levels, in line with what we presented in our investor day in November.

Our familiar made brewhouse fabulous culinary strategy, initiated last July as we rolled out our streamlined menu, removing noncore menu items that added complexity, gained traction in the fourth quarter. Although growing comp sales with fewer menu items in the short term is challenging, this approach sets BJ’s on the right path, allowing for new menu innovation while improving execution and team member satisfaction. Our new familiar made brewhouse fabulous items have been instrumental in propelling the business forward. The October Pizookie dessert registered the highest incidence rate of any seasonal Pizookie, and our Surf-n-Turf Combo increased our overall entree incidence and contributed approximately $300 to our weekly sales average during the promotion period.

In November, we shared with the investment community our three-year culinary strategy, including upgrading 50% of our menu to provide a more visually appealing experience for guests, continuous investment in our core workforce items, and further innovation around 20% of our menu, focusing on value and price point. The menu adjustments are resonating with our team and workflow, enabling us to enhance overall execution. In the fourth quarter, our team member retention improved for both hourly team members and managers compared to the previous year, and is now higher than pre-COVID levels, bringing added stability and reducing training time and costs to our business. Notably, our retention rates surpassed those of our casual dining peers, creating significant synergy in our restaurants, bolstering our bench strength, and presenting career advancement opportunities.

This synergy has led to improved Net Promoter Scores, reduced training and overtime costs, and has steered our restaurant margins in the right direction. Research indicates that a pivotal differentiator in full-service restaurants is the ambiance customers experience. Diners seek a contemporary, relevant atmosphere that complements our team members’ gracious treatment of patrons.

However, the full transcript is there.

BJ’s Restaurants, Inc. Remains Bullish in the Face of Challenging Industry Trends

Remodel Program and Cost Savings Initiatives

Amidst a challenging market climate, BJ’s Restaurants, Inc. remains steadfast in its commitment to growth and optimization. The company completed 36 remodels in fiscal 2023 and is poised to undertake at least 20 more remodels in the ongoing fiscal year. Emphasizing the impact of these strategic initiatives, the management underscored that remodels have proven to drive sales and foot traffic, shaping a favorable path for the company.

By the end of 2024, BJ’s Restaurants, Inc. anticipates approximately half of its restaurants to be remodeled or utilizing the newer, lighter prototype. In addition to bolstering top-line sales, the company aims to identify at least $25 million in cost savings opportunities. Notably, BJ’s Restaurants, Inc. has already realized over $35 million in annualized cost savings through prudent allocation of resources and meticulous reduction of food, labor, operating, and occupancy costs.

Financial Outlook and New Restaurant Openings

Looking ahead, BJ’s Restaurants, Inc. remains focused on expanding its footprint with a balanced approach to opening new restaurants. The company opened five new restaurants in 2023, demonstrating strong performance with weekly sales averaging over $130,000, exceeding the system average by approximately 10%. Notably, restaurants opened since 2021 showcased robust annual run-rate average restaurant-level margins in the mid to upper teens, underpinning the company’s strategic acumen.

As the company steers into 2024, it aims to mitigate investment costs for new builds and further refine its prototype with the objective of reducing investment costs. BJ’s Restaurants, Inc. is working steadfastly to drive top-line sales in the 8% to 10% range through a combination of unit growth and comparable restaurant sales. With an unwavering emphasis on enhancing shareholder value, the company is resolute in its pursuit of a robust long-term financial cadence driven by sales leverage and productive savings initiatives.

Operational Performance and Market Trends

Amidst industry challenges, BJ’s Restaurants, Inc. continued to exhibit efficient restaurant execution, complemented by cost-saving initiatives, which contributed to an improvement in margins during the fourth quarter. The company reported an increase in comparable restaurant sales and restaurant-level cash flow margins, painting a promising picture amidst the prevalent industry headwinds.

However, the company faced headwinds from inclement weather and a relatively cautious consumer environment, impacting sales trends in the first six weeks of 2024. While these challenges have led to a mid-single-digit decline in aggregate comp sales, the company remains bullish about future prospects and expects a turnaround as the year progresses.

Overall, BJ’s Restaurants, Inc. reiterates its commitment to financial prudence and maximizing shareholder value, exemplified by the board’s approval of an additional $50 million share repurchase plan. With a resolute focus on driving sales, expanding margins, and returning capital to shareholders, the company remains well-positioned to navigate industry challenges and uphold its growth trajectory.

In conclusion, BJ’s Restaurants, Inc. maintains a robust outlook, underpinned by strategic initiatives and prudent financial stewardship, positioning the company for sustained growth and enhanced shareholder value.

BJ’s Restaurant & Brewhouse – A Financial Triumph and Flavorful Future

Robust Financial Performance

BJ’s Restaurant & Brewhouse has displayed an outstanding performance compared to casual dining trends, outpacing the industry by approximately 250 basis points in quarter-to-date comp sales for the first few weeks of February. This exceptional feat is a testament to the company’s steadfast commitment to operational excellence and financial acumen.

Margin Expansion and Rigorous Cost Controls

The company’s relentless pursuit of margin expansion has yielded impressive results, with a remarkable elimination of over $35 million in costs annually, surpassing the initial target by $10 million. This success has catapulted the restaurant-level margins to the mid-14% range in Q4, edging closer to the historical margin levels of the pre-pandemic era. BJ’s continuous dedication to enhancing operational efficiency has fortified its position in the market, setting a commendable standard for its peers.

Efficient Cost Management

BJ’s exhibited praiseworthy cost management, with a significant 130 basis points improvement in the cost of sales compared to the previous year. The strategic sourcing of meat products contributed to a 1% decrease in food costs quarter over quarter, effectively mitigating inflationary pressures on other items. The prudent management of labor and benefits expenses resulted in a favorable 30 basis points compared to the same period last year, a testament to the company’s commitment to operational excellence.

Shareholder Value and Financial Flexibility

Asserting its confidence in future growth, BJ’s robust cash flows facilitated the repurchase and retirement of approximately 263,000 shares of common stock at a cost of $6.7 million. Furthermore, the board of directors’ approval for an additional $50 million expansion in the share repurchase program underscores management’s belief in the company’s long-term prospects. BJ’s emphasis on prudent capital allocation and its commitment to enhancing shareholder value testify to the strategic foresight and financial prudence exhibited by the company.

Steadfast Optimism and Strategic Initiatives

Despite anticipated challenges in Q1 due to adverse weather, BJ’s remains resolute in its efforts to navigate through the prevailing headwinds. The company maintains an optimistic outlook, expecting growth in margins throughout the year, driven by strategic initiatives and continued progress in margin improvement endeavors. BJ’s unwavering determination to surpass the 2019 margin levels by the end of the year vividly encapsulates its unyielding commitment to excellence.

Future Projections and Resolute Strategy

Looking ahead to 2024, BJ’s anticipates managing food cost inflation within the flat to low single-digit range and labor inflation in the mid to upper single digits. With a prudent capex spend of approximately $70 million, the company remains steadfast in its disciplined approach to capital allocation, guided by comprehensive restaurant economics, ensuring sustainable growth and value creation for its stakeholders.

Financial Resilience and Shareholder Focus

Amidst significant and improving cash flows from operations, expanding margins, and a robust balance sheet, BJ’s stands poised to deliver enduring value to shareholders through its unwavering focus on sales and productivity initiatives. The company’s resolute commitment to strategic capital allocation and value-enhancing initiatives solidify its position, promising an auspicious journey of sustained growth and unparalleled shareholder value enhancement.

Questions & Answers:

Operator

[Operator instructions] Our first question today comes from Tyler Prause with Stephens, Inc. Please go ahead.

Tyler Prause — Stephens, Inc. — Analyst

Hey, thanks for taking the question. Could you please walk us through the same-store sales components that include traffic mix and price? And how should we think about price flowing through in fiscal year ’24?

Tom Houdek — Chief Financial Officer

Sure. So in the fourth quarter, we had around 7% to 8% of pricing, and that’s about what flowed through to — check — a little bit less on — check — in the mid-7s. So traffic was down about 6%. So that — those are kind of the components that built up to the 0.6% of comp in

BJ’s Restaurants, Inc.: A Spirited Meeting with Investors Unveils Growth Strategy

At a recent meeting with investors, BJ’s Restaurants, Inc. President and Chief Executive Officer, Greg Levin, answered questions regarding the company’s pricing strategy, media presence, and capital allocation. Levin shared insights into BJ’s unit growth guidance, plans for closures, and the progress of their remodel program, shedding light on the company’s long-term goals and prospects. The spirited dialogue brimmed with nuggets of wisdom for investors eager to understand BJ’s future trajectory and transformation. Let’s delve into the discussions and tantalizing insights revealed by Levin in this high-spirited meeting.

Striving for Competitive Pricing

Levin revealed that BJ’s aims to maintain competitive pricing, targeting a reduction from the initial 5%-6% range carried in Q1 of 2024. He assured investors that the company foresees a downward trend in pricing for the rest of the year, echoing an intuitive understanding of the evolving market dynamics and BJ’s strategic response to stay ahead of the curve.

Fueling Media Presence for Brand Growth

When probed about the company’s brand awareness, Levin disclosed plans for an amplified media presence on both linear and connected TV, especially in specific markets. The decision to tap into television advertising for the first time in years reflects BJ’s proactive approach to bolstering its brand awareness and market share. Levin’s emphasis on this strategy indicates a bold, calculated move to capture a larger slice of the consumer mindshare and ensure BJ’s stays at the vanguard of industry competition.

Bracing for Unit Growth and Closures

Levin’s guidance on unit growth and closures underscored the company’s prudent approach to expanding its footprint while optimizing existing operations. He projected a conservative projection of one to two closures for the year, substantiating BJ’s commitment to diligent portfolio optimization and sustainable growth. Levin’s remarks conveyed a message of measured expansion and astute management of the company’s assets.

Strategic Capital Allocation and Store Optimization

During the discussion of capital allocation, Levin expounded on the company’s strategic focus, detailing their decision to forgo restaurant openings in 2024 to bolster resources for share repurchases and debt payments. Moreover, he touched upon BJ’s ongoing efforts to refine their store designs, emphasizing the synergy between cost reduction initiatives and visual appeal. Levin’s insights conveyed a holistic approach to enhancing BJ’s store performance and refining the company’s investment profile.

Revamping for Enhanced Customer Experience

As the dialogue delved into BJ’s remodel program, Levin highlighted the company’s meticulous choice of remodel targets based on sales volume, age, and lease dynamics. He underscored the significance of visual cues and ambiance in revamping BJ’s restaurants, aligning the company’s renovation strategy with its commitment to delivering an elevated dining experience. Levin’s articulation epitomized BJ’s dedication to reinventing its establishments to resonate with evolving customer preferences and expectations.

Ambitious Margin Improvement Endeavors

The closing remarks explored BJ’s margin improvement endeavors, elucidating the prevailing momentum and the company’s unwavering commitment to operational excellence. Levin’s acknowledgment of ongoing margin improvement initiatives and the promising outlook for additional savings underscored BJ’s relentless pursuit of efficiency and profitability. His commentary radiated optimism about BJ’s prospects for sustained growth and margin enhancement despite challenges.

Here, in this meeting of minds, BJ’s Restaurants, Inc. unveiled a profound strategy laced with resilience, wisdom, and a relentless pursuit of progress. Investors witnessed a company poised to navigate the dynamic market landscape with poise at a time when flux was the norm and innovation the ultimate sustenance.

The Stormy Forecast of Restaurant Chain Earnings

Weathering the Financial Storm

Amidst the ebb and flow of consumer spending and unpredictable weather patterns, the forecast for restaurant chain earnings has become increasingly turbulent. The anticipation of margin expansion and sustained EBITDA growth appears to be the silver lining in this financial cloud. However, recent market analysis and consecutive quarterly performances suggest that the storm may be far from over.

A Slippery Start

In a recent earnings call, the Chief Financial Officer highlighted the impact of the weather on the company’s comp sales, emphasizing the variability witnessed in the first part of January. Weeks of low single-digit positive sales were offset by mid-single digit negative figures, reflecting the erratic headwinds faced by the restaurant chain. The CFO also pointed out a noticeable slowdown in consumer spending, particularly within the lower-income brackets, posing a significant challenge to the company’s growth trajectory.

Turbulent Times and Tightening Belts

The company’s President and Chief Executive Officer elaborated on the remodeling strategy, which is pivotal for driving sales growth. The plan to remodel 20 units in the current year raises questions, as previous expectations hinted at a higher number. While the executive clarified that there had been no adjustment to the remodeling plan, the focus on larger and more impactful remodels aimed at enhancing capacity and the overall dining experience has resulted in a strategic shift. Balancing the need for substantial improvements against prudent financial allocation seems to have dictated this course of action.

Shrouded in Uncertainty

The growing concern over the health of the consumer market was starkly evident in the Q&A session, with analysts seeking clarity on the company’s performance in the face of changing consumer behaviors. The prevailing uncertainty was notably linked to the impact of off-premise dining on the company’s same-store sales and the evolving trends in consumer preferences. The company’s cautious approach toward marketing and its emphasis on driving sales through the dining room rather than third-party delivery services mirrored the reluctance to expend resources in unprofitable ventures.

The Long Road Ahead

As the company addresses the challenges ahead, the emphasis on margin improvement as a primary driver of EBITDA growth is abundantly clear. However, the road to recovery seems fraught with unpredictability, as the company navigates through a landscape shaped by shifting consumer behavior and external factors such as inclement weather.

Investors, while hopeful of a brighter future, must brace themselves for stormy weather as the company’s journey through the current fiscal year unfolds. The company’s ability to weather the storm and achieve sustained growth will be a testament to its resilience amidst challenging market conditions.

Bouncing Back: A Snapshot of BJ’s Restaurant & Brewhouse Q4 Earnings Call

Strong Comp Sales and Menu Rationalization

Out of BJ’s Restaurant & Brewhouse’s Q4 Earnings Call came the resounding news of strong comp sales in the industry. Greg Levin, President and CEO, highlighted the company’s outperformance and decisions made in the quarter to handle Veterans Day and reduce discounting. As a result, they achieved more profitable sales with less traffic.

There were noticeable shifts in the behavior of guests in the dining room and off-premise. While the guests in the dining room maintained consistent ordering patterns, off-premise saw negative changes in incidence and mix, indicating a decrease in consumer spending. Additionally, there was a slightly smaller party size year over year.

Levin emphasized the impact of menu rationalization, pointing out that the decision was driven by a need to manage complexity and balance reach and frequency. Based on the restaurant’s extensive industry knowledge, menu rationalization didn’t lead to a direct decrease in sales. Through Levin’s anecdotes and colorful language, we get a glimpse of the restaurant industry’s dynamics, where continually adding to the menu can be beneficial, but eventually reaches a point of diminishing returns.

Stable Inflation Outlook and Margins

Tom Houdek, CFO, offered insights into the company’s COGS outlook, highlighting a more stable inflation outlook for 2024. He predicted stability throughout the year, citing the ability to lock in prices for certain items as a contributing factor. This stability contrasts with the historical peaks and valleys of inflation. Houdek entertained the idea of less volatility compared to the post-COVID years, where rapid fluctuations were more prevalent.

Through their conversation, we gain a deeper understanding of the restaurant’s concerted efforts to manage inflation and maintain stable margins. The CFO’s optimistic outlook provides investors with reassurance amid economic uncertainties.

Loyalty Program and Future Strategies

Sharon Zackfia, an analyst from William Blair and Company, questioned Levin about the impact of menu rationalization on sales and the potential use of loyalty programs to drive customer engagement. Levin emphasized the significance of their loyalty program in driving guest frequency. He alluded to leveraging the program’s offers and incentives to increase guest visits, clearly signaling the company’s focus on customer retention and engagement.

Subsequently, Zackfia inquired about any factors that might influence future sales and margins. Levin pointed out strategic decisions made regarding promotions on Veterans Day and a shift towards emphasizing drive takeout. This underscores the company’s adaptability and strategic approach in navigating the challenges within the dining and off-premise segments of their business.

In sum, the insights from BJ’s Restaurant & Brewhouse’s Q4 Earnings Call paint a picture of resilience, adaptability, and a forward-thinking approach in the face of industry challenges. The company’s emphasis on strategic menu management, stable margins, and leveraging loyalty programs showcases their commitment to sustained growth and success.

BJ’s Restaurants, Inc. Earnings Call Transcripts

BJ’s Restaurants, Inc. Earnings Call: A Deep Dive into Financial Projections

Welcome analysts and investors to the BJ’s Restaurants, Inc. Earnings Call. In this insightful discussion, we unravel the financial projections for the coming years, with analysts from various domains probing the leadership about the company’s growth, cost savings, and marketing strategies.

Unit Growth and Prototype Advancements

Todd Brooks from The Benchmark Company kickstarts the discussion on a curious note, artfully questioning how the prototype advancements set the stage for future unit growth. Greg Levin, President, and CEO of BJ’s, acknowledges the progress but cautions that the shift to accelerated growth may not occur as promptly as anticipated.

He emphasizes the solid returns from the new restaurants, assuring investors about the $130,000 sales with margins in the upper teens. The deft management of costs, he elucidates, is pivotal for optimizing restaurant efficiency and enhancing return on investment.

Cost Savings and Margin Expansion

Nick Setyan of Wedbush Securities delves deeper into the nitty-gritty, seeking insights into the anticipated G&A for ’24 and the marketing expense as a percentage of sales. Greg Levin responds by expounding on the anticipated G&A and marketing expenses, projecting an increment in the latter owing to strategic asset deployment.

The discussion then shifts to Tom Houdek, CFO of BJ’s, who emphasizes the ongoing cost-saving initiatives. Reflecting on Q4 margins, he points out incremental savings realized during the quarter, underlining their cumulative impact when extrapolated over a full year.

Margins and Pricing Leverage

When probed about the expected leverage and achieving margin targets, Tom Houdek stresses the moderation in food cost inflation and the anticipation of labor-side escalations. He foresees a nuanced pricing strategy to offset these dynamics and alludes to Q4 as a reliable indicator for the full year.

Succinctly put, the call refracted the top executives’ strategic approach to balance growth, cost savings, and margin expansion in BJ’s Restaurants, Inc.

Analysts and Concluding Remarks

As we conclude the comprehensive earnings call, the analysts’ incisive queries and the leaders’ measured responses have delineated a detailed roadmap for investors navigating BJ’s Restaurants, Inc.

More BJRI analysis and comprehensive details are available in the earnings call transcripts.

Insightful Analysis of BJ’s Restaurants (BJRI) Q4 2023 Earnings Call

Actionable Trade Ideas

Meeting Agenda:

Foreword from the Operator: