Analysts Remain Positive About McCormick & Schmick’s

Published on
December 21, 2008

McCormick & Schmick’s Seafood Restaurants may be in a better position to weather the economic downturn in 2009 than other upscale seafood chains.

Restaurant analysts expect casual chains to fare better than upscale eateries in 2009. Larry Miller, an analyst with RBC Capital Markets, said in a recent note to clients that, while fast-food stocks will perform best in the bleak economy, casual chains may also do well.

If the economy starts to recover, Miller wrote, casual dining chains with a large amount of company-owned locations such as McCormick & Schmick’s and Texas Roadhouse will be the restaurant stocks in which to invest.

In addition, as businesses cut employees and expenses in 2009, such as taking clients out to eat, McCormick & Schmick’s is positioned to take advantage of this trend, particularly for business lunches.

“McCormick & Schmick’s has better lunch values than [most of] the upscale segment, and can compete with those that don’t have lunch, such as Morton’s Steakhouse,” says Darren Tristano, executive VP of foodservice research and consulting firm Technomic in Chicago.

Another  factor working in the Portland, Ore.-based seafood chain’s favor is the fact that McCormick & Schmick’s has had consistent growth in earnings, year over a year. “They are growing at a nice rate, but not at a pace that is so high that they get themselves into trouble,” says Tristano. In its most recent quarter, McCormick & Schmick’s revenues rose 13.4 percent to $99.9 million.

And, despite the tough economic climate in 2008, McCormick & Schmick’s kept its original store-opening schedule with 11 units opened during the year. It opened its 86th restaurant in Naples, Fla., in early December. For fiscal 2009, the company has reduced its expansion rate, planning to open five or six restaurants.
 

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