Hi Dennis,
Haven't been able to keep up lately, but I noticed this from Dow Jones today. Greetings and good luck to all.
Baird
12/18/97 Rainforest Cafe Backs 4th-Quarter Outlook, Plans Expansion
By Kate Berry
Staff Reporter
MIAMI -(Dow Jones)- Rainforest Cafe Inc., whose shares have trended downward in the past two weeks in sympathy with other restaurant stocks, plans to double the number of themed restaurants it operates in 1998.
Mark Robinow, chief financial officer of the Hopkins, Minn.-based chain, said he is "comfortable" with analysts' earnings projections of 25 cents a share in the fourth quarter, up 66% from year-earlier earnings, and of 79 cents a share for the year, up 93%.
Rainforest Cafe (RAIN) opened two new restaurants in the past few weeks, in Aventura Mall in Miami and at the MGM Grand Hotel in Las Vegas, bringing its year-end total to 13 restaurants in the U.S. and three abroad. It plans to at least double in size next year - opening 16 to 20 restaurants, divided evenly between U.S. and foreign cities.
But shares of Rainforest Cafe have fallen since Dec. 5, when PaineWebber Inc. analyst Craig Bibb downgraded another themed-restaurant stock, Dave & Buster's Inc. (DANB), based in Dallas. Shares of Dave & Buster's - whose 13 outlets, 12 in the U.S., feature virtual-reality games and cater to adults over 21 years old - fell 12.5% on heavy volume the day of the downgrading, to $23.625.
Rainforest Cafe may also feel the waves from the dive taken by Famous Dave's of America (DAVE), whose stock plummeted nearly 44% Tuesday after the barbeque-restaurant chain said it would report a wider-than-expected fourth-quarter loss because of slower sales at new stores. The stock, which ended Monday at $17.088, closed Tuesday at $9.625. Famous Dave's, based in Minneapolis, operates 15 restaurants.
"You get in favor and out of favor like every other industry," Robinow said. "It's normal to have industry oscillations and it's happened to us before."
Rainforest Cafe's restaurants threw off a healthy 22% of sales in profits in the third quarter, and Robinow said he expects a bottom-line contribution of between 20% and 22% in the fourth quarter.
Part of that success stems, he said, from the sale of nearly 4,000 different items at retail stores in Rainforest Cafe's restaurants. They account for roughly 25% of total sales at the chain.
But Robinow cautioned Wall Street to temper expectations for the company's same-store sales results, generally considered one of the best indicators of retail growth. Same-store sales, which are reported monthly by most retailers, measure sales at stores open more than a year.
He said it is "unrealistic" to expect positive monthly same-store comparisons at its restaurants after the first year of operation. Robinow said a 10% to 15% drop in sales after a store's inaugural year is "typical."
"It's very much a phenomenon wherever we open, and it's difficult for any concept to maintain that level of enthusiasm," Robinow said.
"People should look more at how much we make and what our bottom line is, and not focus so much on same-store sales," he said.
The company is planning a public offering to raise $100 million in additional capital to fund expansion. Robinow said the infusion would give the company "financial flexibility."
"We don't have a designated use of that money," he said, "but smart companies raise money in a strong market." |
