Cosi Q1 loss widens on restaurant opening costs

by Eric Schroeder
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DEERFIELD, ILL. — The costs and expenses associated with opening new restaurants weighed on first-quarter earnings at Cosi, Inc., as the company sustained a loss of $4,205,000 in the period ended April 2. This compared with a loss of $3,928,300 in the first quarter of fiscal 2006. Based on the lower-than-expected first-quarter results, Cosi revised downward its guidance for the full year. The company, which in March projected earnings per share of 8c to 12c, now expects to sustain a loss of between 18c and 23c per share.

Net revenues for the quarter totaled $32,090,800, up 8% from $29,645,000 in the first quarter of 2006. Comparable restaurant sales fell 2.4% in the quarter.

"The near-term comparable sales volatility coupled with new restaurants that have not yet reached expected operating levels negatively impacted restaurant operating margins," said William Koziel, chief financial officer. "We continue to focus on initiatives at the store level to improve sales and profitability while maintaining our high standards of customer service. Equally important is our continued execution of our restaurant development strategy."

During the first quarter, Cosi opened nine restaurants, including six franchise units and three company-owned operations.

Mr. Koziel said Cosi expects to open 45 to 55 franchise units in 2007, with most of the openings slated for the second half of the year. The company expects to open between 10 and 14 company-owned locations during the year, he said.

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