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Investors Should Not Miss this Restaurant Stock

June 24, 2015 | About:

Kona Grill (NASDAQ:KONA) offers guests freshly prepared food, personalized service and a warm contemporary ambiance that creates an exceptional, yet affordable dining experience. The menu features a diverse selection of appetizers, salads, sandwiches, chicken, seafood, steaks, pasta and pizzas that incorporate over 40 signature sauces and dressings that are made from scratch using high-quality, fresh ingredients. Kona Grill also offers guests a wide selection of award-winning sushi, including sashimi, traditional favorites and several proprietary dishes.

It features American favorites with an international influence and award-winning sushi in a casually elegant atmosphere. Kona Grill owns and operates 31 restaurants.

Its sophisticated and diverse menu boasts a wide array of options for guests with all tastes –freshly prepared sushi, innovative American grill fare and comprehensive selection of cocktails.

It boasts of exceptional customer loyalty. According to the company’s website, 17% of guests dine with Kona at least once every 10 days. It is the leading retail center with 15 million annual visitors, half the visits include dining.

First-quarter results

Restaurant sales

Restaurant sales during the quarter stood at $32.8 million (which was an increase of 18.8% from $27.6 million in the prior year period). It was their eighth consecutive quarter of positive same-store sales. This increase was driven by operating week growth of 17% and a same-store sales increase of 2.2% compared to 6.2% growth in the year-ago quarter. The increase in same-store sales reflects the combination of higher customer traffic, which grew 1.0% and an increase in average check per customer, which increased 1.2%.

Restaurant operating profit

Restaurant operating profit during the quarter was $5.4 million (which marked an increase of 8.1% from $5.0 million in the prior year period).

Restaurant operating profit during the quarter was 16.4% (as a percentage of sales). It was 18.1% in the first quarter of 2014.

Net loss

The company experienced a net loss of $925,000, or ($0.08) per share (in comparison to a net income of $251,000, or $0.03 per share in the prior year period).

Restaurant opening

It opened a new restaurant in San Juan, Puerto Rico.

Cash and cash equivalents

Cash and Cash Equivalents stood at $32.0 million (which was $36.6 million at December 31, 2014).


The company had no borrowing as at the end of the quarter.

Projections for the second quarter

The company expects the following for the second quarter:

  1. Restaurant sales are expected to be around $36.0 million.
  2. It expects annual general and administrative expenses of approximately $12.8 million.
  3. Capex is expected to be around $40 million.
  4. Tenant allowances are estimated at approximately $7 million.

Launch of new menu

KONA recently announced the launch of its newest seasonal menu Essence. The Essence menu, Kona Grill's second seasonal menu of 2015, features seven stimulating items including a Rock Shrimp Tempura and savory Roasted Rosemary Chicken. This menu offers an array of options from Yellowtail Tataki Sashimi to a classic Greek Salad to an Albacore Steak Slider.

My takeaway

The company reported another solid top line result. Comparable restaurant sales growth of 2.2% outpaced the casual dining industry. Non-comparable restaurants continue to perform ahead of the company’s internal forecast both on the top-line and through the realization of operating efficiencies as trends shift towards normalized and identifiable patterns.It has planned a 20% growth initiative for the next few years.

Restaurant stocks are booming, and this company is no exception. Perceptions have changed as regards the way people eat out. This company posted solid quarterly report and is expected to create shareholder returns in the near future. Investors may add this company to their portfolio.

This American grill and sushi bar has huge potential and is currently focusing on brand building and expansion. It is a long-term stock. Now people are more health conscious and this company boasts of an array of healthy food options. The company boasts of new menu offerings, affordability, speed and hospitality. It has managed to carve a niche for itself in the market. I would suggest a BUY for this company.

Rating: 2.0/5 (1 vote)



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