I talked with Paul Motenko yesterday, who filled in a few blank areas for me. They won't be doing a conference call this quarter, as these are costly and there haven't been that many participants in the past.
Management hasn't purchased many of the warrants yet. With the extremely thin volume, significant buying sends the price sky rocketing. They have been making small, steady purchases, which might eventually add up, but to date they've hardly purchased any. I have noticed that there are few days now with zero volume as compared to before, so this is consistent with somebody constantly buying warrants with limit orders. I think this buying activity tends to put a floor under things, but that's about it.
Cheese prices are again running up, which will have a negative impact on the bottom line. Some restaurants are also reaching saturation points, where no more customers can be accommodated, so eventually it will be hard to increase same sales stores for these restaurants. To me, this is positive in one way, and that is that with strong demand there is also pricing power. Unfortunately, higher prices might be required just to offset higher cheese prices.
Alex Muruelo is definitely out of the picture, and the other past prospective buyer was not a good fit, and in fact is now financially weaker than CHGO is now. He didn't mention if there were any other prospective buyers right now, but indicated they are focused on growing the business.
Management remains optimistic for the long haul, and they continue to identify new growth opportunities, locations, etc. The new CEO is hard at work and making a contribution to their growth plans. Pietro conversions are at an end, as the margins are not as good as with the large brew restaurant format. Also, Pietros clientele tend to be more of the Miller beer set, and less likely to drink BJ microbrewed beers, etc.
All in all, I remain optimistic about CHGO's prospects. Management seems to have a good growth plan, are executing it with good results, and moving forward. I am impressed that they learned from their Pietros experience, and adjusted the business plan to achieve better growth. Sooner or later some restaurant industry analyst will start covering the stock, and the stock will get noticed. |
