BJRI - BJ's Restaurants stock slips as profits fall short of the mark

BJ’s Restaurant ( NASDAQ: BJRI ) shares slid sharply in Friday’s premarket hours after posting lighter than anticipated profits for the second quarter.

For the quarter reported, the chain posted an only one cent EPS figure, $0.25 below the bar set by Wall Street. Meanwhile $329.7M in revenue rose above estimates by $1.22M a comparable restaurant sales increased 11.7%.

While the sales trends were cited as a strong signal of brand affinity and the hiring of 6K new employees was highlighted by CEO Greg Levin as a sign labor concerns have peaked, the inflation impact appeared to hit profits.

“Given the acceleration of inflation throughout the quarter in our input costs, we are now scheduled to take an additional 2% of pricing round in early August which follows the 1.4% of menu pricing taken in early June,” Levin explained in a call with analysts. “In aggregate, our pricing is still behind the current level of inflation.”

As such, the company is pursuing more price increases and menu reconfiguration in coming months. Details on the precise initiatives were not provided.

Additionally, the hiring of thousands of new employees increased training costs and hit the bottom line. Labor costs ticked in at 37.3% of total sales, according to company filings.

Moving forward, Levin voiced confidence in the company to drive profits moving forward, with surging sales eventually flowing through to the bottom line. However, he also noted that the third quarter is the “seasonally lowest sales quarter” for the chain, suggesting a profit recovery may progress more slowly in the coming months.

Shares of the California-based brewpub chain fell 10.42% at premarket lows.

Read the earnings call transcript .

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