Einstein Noah net eases 52% in Q1

by Eric Schroeder
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LAKEWOOD, COLO. — Efforts to generate shareholder value over the long term crimped first-quarter earnings at Einstein Noah Restaurant Group. Net income in the quarter ended March 31 totaled $1,850,000, equal to 12c per share on the common stock, down 52% from $3,842,000, or 24c per share, in the same period a year ago.

Net sales in the first quarter totaled $100,423,000, down 3% from $103,264,000 in the same period a year ago.

"Our ability to build a ‘best in class’ organization and strong go-forward plan is built on the significant opportunity we have to regain transaction momentum and increase customer loyalty on our brands," said Jeff O’Neill, chief executive officer and president. "Ultimately, our financial performance for the quarter reflected the underlying economic pressure on our customers and the beginning of our deliberate transition to a new approach to building shareholder value over the long term. To that point, we increased marketing investments during the period with the intention of building awareness, trial, and frequency.

"We also invested in new products like our new bite-sized Bagel Poppers and our ‘Free Bagel Friday’ promotion, which generated strong trial and awareness for our brands. While this approach pressured our margins during the quarter, it’s the right thing to do for the business, and the best way to create significant value for shareholders going forward."

During the first quarter, the company opened one franchised Einstein Bros. location as well as five Einstein Bros. licensed location. The company also entered into two new Einstein Bros. development agreements for a total of 11 locations. For the remainder of fiscal 2009, the company plans to open six company-owned stores, five to seven additional franchised locations, and 25 to 30 additional licensed locations.

Also during the first quarter, the company paid down $7.6 million on its first lien term loan.

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