Economic Slowdown Hits McCormick & Schmick's
The economic downturn and higher operating costs took a toll on McCormick & Schmick's Seafood Restaurant's first quarter results, the Portland, Ore., company reported yesterday.
The upscale casual seafood chain's same restaurant sales fell 5.8 percent in the first quarter of 2008, which ended March 29. Net income totaled $118,000, down from $3.2 million in the first quarter of 2007. However, revenues increased 13.4 percent to $92.3 million.
"The decrease in comparable sales, we believe, is a reflection of weak consumer spending in the general economy. The decreased comparable sales, combined with higher commodity and labor costs, resulted in lower operating margins for the quarter," said Douglas Schmick, chairman and CEO of McCormick & Schmick's, in a press release.
"We have not had any indication that our aspirational guest will be resuming their previous dining frequency in the near term," he added. "However, we are hopeful that we are entering a period of general economic stability, and that our decreased comparable sales will ease in the back half of the year."
McCormick & Schmick's opened three restaurants in the first quarter of 2008 in Anaheim, Calif., Cherry Hill, N.J., and Milwaukee, bringing the total to 79 U.S. restaurants and six in Canada under The Boathouse banner. The company plans to add one location in the second quarter and a total of 12 this year.
Despite its lackluster first quarter results, McCormick & Schmick's still expects its 2008 revenues to total $410 million to $420 million and same restaurant sales to slide 2 to 4 percent.
A larger-than-anticipated drop in discretionary consumer spending prompted Technomic in January to downgrade its 2008 U.S. foodservice industry nominal growth forecast from 5.1 percent to 3.6 percent. The Chicago research and consulting firm projects U.S. foodservice industry sales to total $426.1 billion this year.
And today Technomic said very few consumers plan to spend their economic stimulus checks at restaurants, citing its consumer sentiment survey. They will be far more likely to save or invest the money or use it to pay off debt, the firm added.
"As experienced restaurant operators, we have a definite approach to managing the business in uncertain times," said Schmick. "We feel that we have a very strong balance sheet, including only $20 million drawn on a $150 million credit line at the end of the quarter.
"We are reaching out to the strongest segments of our customer base with targeted messaging, have broadened our menu to enhance the appeal of our offering, and are being vigilant and active in our cost controls to limit the full impact of commodity and labor cost increases. We have focused on the core fundamentals of our concept, value being a cornerstone," he added.