Good Times Restaurants. Stock Earnings Reports

Summary of Key Points for Investors - Good Times Restaurants Inc. Q1 FY2025 Earnings Call

Financial Performance:

• Bad Daddy's:
  • 1.5% increase in same-store sales during the quarter.
  • Total restaurant sales rose by $2 million to $26.1 million, largely due to an additional week in the current fiscal quarter and menu price increases.
  • Food and beverage costs remained stable at 31.5%, but anticipate future increases in ground beef costs due to supply constraints.
  • Labor costs decreased by 70 basis points to 35.1%, attributed to improved labor productivity despite higher wage rates.
  • Restaurant-level operating profit increased to $3.3 million (12.6% of sales) from $2.6 million (10.7%) year-over-year.
• Good Times:
  • Total sales for company-owned restaurants rose by $1.1 million to $9.9 million, with same-store sales roughly flat compared to the prior year.
  • Average menu price increased by 3.9%.
  • Food and packaging costs rose to 31.8%, leading to a decrease in restaurant-level operating profit to $0.9 million (8.6% of sales).
  • Labor costs increased significantly to 36.7%, impacting margins.

Operational Initiatives:

• Bad Daddy's is enhancing its menu, focusing on smash patty burgers to improve margins.
• Good Times is undergoing operational improvements, including revised cooking procedures and standards to enhance product quality, particularly for drive-thru service.
• The company is experimenting with limited-time specials to attract customers and has outlined upcoming seasonal menu additions.

Challenges and Risks:

• Bad weather in January negatively impacted sales, with expectations of similar weather conditions affecting sales in future months.
• Good Times faces headwinds from intense competition and rising operational costs.
• Significant factors affecting performance include labor costs, supply chain constraints, and market pricing pressures.

Capital Allocation and Future Plans:

• The company plans to continue its share repurchase program while also investing in capital expenditures for remodels and acquisitions.
• Long-term goals include strategically selecting new Bad Daddy's locations and continuing renovations for existing Good Times restaurants to enhance competitiveness.

Market Outlook:

• The company remains cautiously optimistic despite seasonal challenges and external pressures, signaling plans to adapt marketing strategies to attract varied demographics effectively.

Earnings per Share:

• Reported net income was $0.2 million or $0.02 per share compared to a loss of $0.6 million or $0.05 per share in the previous year.

Growth Strategies:

• The focus will remain on product quality, customer loyalty, and operational excellence to drive traffic and sales growth across both brands.
• Continued efforts to modernize the Good Times brand through menu rationalization and advertising strategies aimed at younger demographics.

Conclusion:

Investors should monitor the developments in menu improvement, marketing strategies, and weather impacts on sales as key indicators of the company's performance in the upcoming quarters. Positive gross margin improvements could lead to sustained investor confidence despite the pressures of labor and ingredient costs.