Benihana Misses Estimates, But Revenue Soars

| About: Benihana Inc. (BNHN)

Benihana Inc. (NASDAQ:BNHN) announced its first quarter 2011 earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 10 cents, but soared 60% from a year-ago quarter’s 5 cents. Results reflect the benefits of the Benihana Teppanyaki Renewal Program, which the company initiated in 2009 to improve the dining experience for the guests at the Benihana Teppanyaki restaurants.

The U.S. chain of Japanese restaurants posted a 5.0% year-over-year rise in total revenue to $100.8 million, as comparable restaurant sales jumped 2.4%, resulting from a 3.3% same store-sales increase at Benihana Teppanyaki restaurants and a 2.4% leap at Haru, whereas same store-sales remained flat year over year at RA Sushi restaurant.

The Miami-based Japanese restaurant company drives 99.5% of its revenues from restaurant sales (65% from Benihana Teppanyaki, 25% RA Sushi and 10% Haru) and 0.5% from franchisee fees and royalty. Restaurant sales increased 5% to $100.2 million in the reported quarter and franchisee fees and royalty sales grew 7% to $542 million.

Cost of food and beverage sales escalated 110 basis points (bps) from the year-ago quarter to 24.5%, and general and administrative expense was up 170 bps to 9.3%. However, restaurant operating expenses fell 240 bps to 63.7%. As a result, operating income expanded 25.0% year over year to $2.5 million and operating margin improved 40 basis points (bps) to 2.5%.

Financial Position
Over the 16 week period, Benihana raised its cash balance by $3.6 million to $6.1 million and reduced its borrowings to $17.7 million from $22.4 million. At the end of the first quarter, total current asset was $19.3 million and stockholders' equity was $145.3 million.

Benihana operates 97 restaurants, including 63 Benihana teppanyaki restaurants, 25 RA Sushi Bar restaurants and 9 Haru sushi restaurants. Additionally, the company has 20 franchised Benihana teppanyaki restaurants, which are operating in the U.S., Latin America and the Caribbean.

We have a Zacks Rank of #2 (short-term Buy recommendation) on the shares. We also reiterate our long-term Neutral rating.