Bravo Brio Restaurant Group's (BBRG) CEO Saed Mohseni on Q2 2014 Results - Earnings Call Transcript

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 |  About: Bravo Brio Restaurant Group, Inc. (BBRG)
by: SA Transcripts

Bravo Brio Restaurant Group, Inc. (NASDAQ:BBRG)

Q2 2014 Earnings Conference Call

July 31, 2014 05:00 pm ET

Executives

Saed Mohseni - President ,Chief Executive Officer, Director

Jim O'Connor - Chief Financial Officer, Treasurer, Secretary

Brian O'Malley - Chief Operating Officer

Analysts

Chris O'Cull - KeyBanc

Will Slabaugh - Stephens

Imran Ali - Wells Fargo

Andy Barish - Jefferies

Josh Long - Piper Jaffray

Peter Saleh - Telsey Advisory Group

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Bravo Brio Restaurant Group Second Quarter 2014 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this conference call is being recorded today, July 31, 2014.

On the call, we have Saed Mohseni, President and Chief Executive Officer; Jim O'Connor, Chief Financial Officer; and Brian O’Malley, Chief Operating Officer.

Now, I would like to turn the conference over to Jim O'Connor, Chief Financial Officer. Please go ahead, sir.

Jim O'Connor

Good afternoon, everyone. Thanks for joining us today. At the market close, we issued our earnings release for our first quarter 2014 financial results, which can also be found in the Investor Relations section of our corporate website at www.bbrg.com.

Please be aware that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and one should not place undue reliance upon them.

Forward-looking statements are also subject to numerous risks and uncertainties that can cause actual results to differ materially from what we expect. We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Like all of our earnings and other press releases, webcasts and presentations, these filings can be accessed through our corporate website.

I would like to now turn the call over to Saed Mohseni, our President and Chief Executive Officer, for some opening remarks. Saed?

Saed Mohseni

Thank you, Jim. Good afternoon, everyone. Thanks for joining us today. Our second quarter results were below our expectation. This was due in part to the overall weakness in retail spending and the intense discounting and proportional environment in casual dining particularly within Italian segment.

Despite the negative comp sales, our restaurant operating team executed at the high level, delivering outstanding guest experience while limiting margin erosion by effectively managing cost.

We believe that we are temporarily losing our aspirational guests for the reason that I just articulated and we have not yet replaced in insufficient quantities with more affluent guests. Therefore, we have developed strategy and programs to offset the traffic decline by focusing on our point of difference which in turn should attract new guests with more discretionary income.

At the same time, everyday value will continue to play a key role in our menu development and marketing strategy. I am going to provide an overview of some of our key traffic building initiatives and Brian will later provide some additional details on each of these measures, but as always we aim to be the best local Italian restaurant and we set ourselves apart through the quality of our food, the quality of our service and our exceptional ambience and value.

We have already gained brand equity with our Lighter Side of Tuscany and Lighter Side of Rome menu and we will continue positioning ourselves as a healthier option within Italian dining segment.

The Lighter Side popularity, particularly among our female guests remains as strong as ever and we will continue to introduce new light items with each new menu rollout. We will continue to play to our brands' strength of quality and flavorful food by implementing and emphasizing our daily chef features.

With culinary trained-executive chefs at each of our restaurant, the introduction of chef features will highlight our culinary expertise and creativity on daily basis.

As Brian will later discuss, we are deepening our commitment to sustainability as it relates to our menu and our wine list. We are expanding our loyalty program through an introduction Eat Repeat Reward, to recognize our most loyal guest and to encourage future visit.

We are enhancing our mobile capabilities by implementing the responsive design features into a website to allow a guest to have the better and easier access to a mobile website. Additionally, we will increase our marketing expenditure in order to explore new marketing channels.

Finally, we are partnering with OpenTable to implement their cloud-based reservation system and table management platform in all of our restaurants by early 2015. We believe that this will improve our brand awareness and help us to expand our guest base.

As always, we will remain focused on execution to ensure the quality of our operation remains at the very high level. The series of initiatives, which I just outlined are designed to build sales and profitability over time by attracting new guests and creating highly satisfied guests at each meal on every visit.

Now, I would turn the call over to Jim O'Connor, our Chief Financial Officer, to provide financial update.

Jim O'Connor

Thanks, Saed. With that introduction, let's now review our second quarter results for a 13-week period ended June 29, 2014, and then discussed our revised guidance for the full-year.

The revenues fell 1.1% to $104.5 million from $105.6 million. The decrease in revenues was a result of lower comparable restaurant sales offset by a net addition of 56 operating weeks.

Consolidated comparable sales declined 5.1%, which consisted of a 6.2% decrease in guest counts, partially offset by 1.1% increase in average check. During the quarter, we opened one Bravo Restaurant and closed two Brio Restaurants. Restaurant revenues at Bravo decreased $2 million to $39.1 million compared to $41.1 million in the prior year period.

Comparable sales declined 6% as the guest count decrease of 9% was only partially offset by 3% increase in average check. Average weekly sales for comparable Bravo Restaurants were 64,100.

Restaurant revenues at Brio grew 1.3% or $0.9 million to $65.3 million compared to $64.4 million in the prior year period. Comparable sales declined 4.5% which consisted of decreases in guest counts and average check 3.7% and 0.8%, respectively.

Average weekly sales for comparable to Brio restaurants were 87,200. Note that approximately 18% of our Brio restaurants are not included in the comparable base because of its higher rate of development than Bravo in the recent past.

Now, let's review our expenses in greater detail. Cost of sales as a percentage of revenue rose 50 basis points to 26.1%, due to higher commodity costs principally for seafood, but also as a result of higher diary, beef and pork costs.

Labor cost as a percentage of revenue rose 20 basis points to 35.1% from 34.9%. Operating and occupancy costs as a percentage of revenue were 15.6% and 6.8%, respectively, a combined decline of 10 basis points compared to the prior year period.

Taking these four expense categories together, total restaurant operating cost decreased $0.4 million or 0.5% to $87.3 million from $87.7 million in the same period last year. Our overall restaurant operating profit decreased $0.7 million to $17.2 million from $17.9 million, while restaurant level margins fell 50 basis points to 16.5% compared to 17% in the year ago period.

Essentially the majority of the reduction in our restaurant level margin was driven by an increase in cost of sales as a result of higher commodity cost. We were pleased that our unit level restaurant teams were again able to effectively manage labor and operating costs to limit the deleveraging impact resulting from lower comparable sales.

General and administrative expenses increased $0.1 million or 1.3% to $5.9 million compared to $5.8 million in the same period last year and as a percentage of revenue G&A rose to 5.7% from 5.5% in the second quarter last year mainly due to sales deleveraging.

Pre-opening costs, which were driven by the timing and number of restaurant openings in the given period were $679,000 compared to $558,000 in the year ago period. We opened one restaurant in the second quarter this year and had three locations under construction, whereas last year opened one restaurant and had another five locations under construction.

Depreciation and amortization expenses increased 10 basis points to 4.8% of revenue, due to deleveraging from lower comparable restaurant sales. Net interest expense declined to $236,000 from 284,000, because of lower average outstanding debt.

Outstanding debt at the end of the quarter was $10.8 million. Net income was $4 million or $0.20 per diluted share compared to net income or a $4.5 million or $0.22 per diluted share in the same period last year.

Turning to our outlook, we are updating our expectations for the full year based upon our year-to-date results and a more conservative view regarding the next two quarters. Specifically, we have lowered our range for revenues to between $405 million and $410 million from $420 million to $430 million and have lowered our projections for annual comparable sales to between minus 5% and minus 4% from minus 2% to positive 1.

Note that our lower revenue range reflects both, the reduction in comparable sales guidance as well as the closure of the two Brio restaurants during the second quarter. We will open total of six restaurants this year of which we have already opened one Bravo during the second quarter as well as Brio in mid-July. Our full year plan consists of two Brios modeled at average unit volumes of 85,000 per week and four Bravos modeled at average unit volumes of 65,000 per week. These assumptions reflect both, the historical median volumes of both brands and are unchanged from prior years.

Pre-opening cost will be between $3.5 million and $4 million, while net capital expenditures are projected between $22 million and $24 million and will be funded entirely through operating cash flows. Both of these assumptions are unchanged. Our estimated annual commodity inflation range remains at 3% to 4%, with seafood principally shrimp, still the largest cost driver although we are experiencing elevated cost pressures in beef, pork and dairy.

Our annual diluted earnings per share ranges now between $0.71 and $0.75 from $0.78 to $0.84. We are also lowering our estimated annual effective tax rate to 27% from 28%.

During the second quarter, we repurchased approximately 161,000 shares at a cost of $2.4 million. We currently have $11.5 million remaining on our current $20 million share repurchase authorization, which expires at the end of fiscal 2014.

Since our share repurchase program began in the fourth quarter of 2012, we have repurchased approximately 1.1 million shares at a cost of $15.8 million.

Now I would like to turn the call over to Brian O'Malley, our Chief Operating Officer, to discuss some of our operational initiatives. Brian?

Brian O'Malley

Thanks Jim. Good afternoon. This past Tuesday, we celebrated National Lasagna Day, a tradition that our just look forward to every year, where offer 50% off of our Lasagna entrées. This celebration will be followed by National Pasta Month in October. Both these events are great occasions in which we celebrate our Thai culinary tradition and provide guests with not only great value, but an opportunity to enjoy a current favorite dish.

Our Lighter Side menus introduced more than a year ago continue to be very popular with our guests and account for about 20% of our dinner traffic at Brio and 16% at Bravo. We view having a broad range of lighter fare options as a true brand differentiator, which appeals to more affluent guest base.

We recently rolled out new Brio menu, which now incorporates the lighter side of Tuscany menu along with traditional time classics, all on one core menu. As part of this launch, and in response to guests' feedback, we've added three light menu items, bringing our total to 19 light menu items all under 595 calories.

Our gluten-free menu continues to be very well received by our guests. As part of our efforts to broaden the portion of our menu using items sourced through sustainable farming techniques, we have added such items as cage-free eggs, [Amish] raised, whole chicken and Rockport [house]. We are also introducing a new wine list of which two-thirds of the wines are produced using sustainable methods.

During the second quarter, we launched our weekend brunch program, which included a new selection of bunch classics as well as many of our guests' longtime favorites. Although brunch is only a small part of our overall sales mix, the day part is growing across the industry and we believe that we have a distinct opportunity to showcase the flavor, value and variety that our brands have to offer at attractive price points.

We are pleased with the increase in our brunch sales to-date, which suggest to us that our guests increasingly view our brands as places to gather with friends and family.

We will place a greater emphasis on chef feature cards, which will help to highlight our unique position of having culinary training executive chefs in each of our restaurants. Our greater use of the daily chef features enables us to showcase the creative talents of our executive chefs while providing regional or seasonal menu offerings.

Some of the more popular items will be featuring are the quinoa stuffed baby peppers in watermelon, arugula and walnut salad and house special featuring imported Italian pasta, pancetta, caramelized onions in a house made marinara. Note that all of the features I mentioned are less than 595 calories.

Late this quarter, we will launch Eat Repeat Reward program as the next enhancement of our loyalty program. The goal of this feature is to both, encourage repeat business and to thank our frequent guests for the continued loyalty while ensuring that their expectations are exceeded each and every day. Of course, we will continue to reward our most loyal guests with surprise and delight offers that are already part of the current loyalty program.

With respect to marketing, we will continue to focus on social media, where engagement rankings are improving as well as increasing our traditional marketing spending in areas such as radio spots in select markets.

As our guest base continues to expand their use of mobile technologies, we are incorporating responsive design features into the website to enhance our mobile platform and by the end of third quarter we launched upgraded versions of our mobile apps for each brand.

As Saed mentioned, by early 2015, we will have completed our lot of OpenTable. We believe that the use of online reservation platform will enable us to increase our share of last-minute and special occasion diners as well as capture a greater share of business travelers.

Our adoption of OpenTable is also in response to guest feedback in terms of providing them an easier way to dine with us. In addition, this will help us at the front door with cable management. Again, the enhancements to our website mobile apps will our guests easily utilize the OpenTable reservation system along with our platforms.

With that, I would like to turn the call over to Saed, who will wrap up our formal comments. Saed?

Saed Mohseni

Thank you, Brian. Before taking your questions, let me leave you with some concluding thoughts. We believe that enduring restaurant brands were built one guest at a time. Our mission is to develop loyal lifelong guests by delivering the highest quality of food and service to each guest, at each meal each and every day.

We believe that we have in initiatives to increase our traffic and comp sales over time and we are determined to achieve this objective.

Our expansion plan for 2014 consists of six restaurants, two Brios and four Bravos. Our first opening of the year was a Bravo in second quarter located in Charlotte, North Carolina, followed by Brio opening in Irvine, California in the third quarter. We will open another Brio and three Bravos late in the fourth quarter. These are high-quality sites, which we believe will be a great addition to a portfolio of restaurants.

Next quarter, we intend to provide additional information concerning our 2015 expansion plan, which will be more front-loaded compared to 2014. A long-term development objectives are intact and we can foresee many opportunity for Bravo and Brio restaurants over time, but at this time we will not accelerate development from the current level until we see better sales results from our core restaurant base.

We are proud of our team members who represent our brand and/or dedicated themselves every day to provide guests with quality experience. I thank each and every one of them for their hard work and dedication. Thank you for your attention and interest in BBRG. We will be happy to answer any questions that you might have.

Operator, would you please open a line for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We will take our first question from Chris O'Cull with KeyBanc. Please go ahead.

Chris O'Cull - KeyBanc

Great. Thanks. Good afternoon, guys.

Saed Mohseni

Hi, Chris. Good afternoon.

Chris O'Cull - KeyBanc

Saed, can you tell us a little bit about the stores, what were the issues for the two stores that closed?

Saed Mohseni

Sure. One of those stores or both of the stores were in the projects that won the project itself. They ended up being not a very successful one. Fortunately for us, we actually have had as we do in all of our leases have opportunity to re-examine the success with the restaurant after two years or three years. In this case was two years and decide where now we want to continue operating in the center. We just did not see that the center itself is going to be success on a long-term.

In the other project, this was the only restaurant that we had that was really not complemented with other retail centers. In other words, this is built in area where they have a high household income, there was no retail driving to enhance our business. In that case as well we decided that really in long-term, we can probably do better in the same market, so we decided close those two restaurants.

Chris O'Cull - KeyBanc

The store was in a fairly new store as well?

Saed Mohseni

Yes. Both of them were less than three years.

Chris O'Cull - KeyBanc

Okay. Jim, how many restaurants are losing cash year-to-date?

Jim O'Connor

Yes. We only have certainly the two that we just closed, where two of them. Then the rest of them, we have a couple of underperforming restaurants that aren't nearly what the two that we just disclosed for, so they are marginal underperformers.

Chris O'Cull - KeyBanc

Okay. Then Saed, I found it interesting that you are focused on attracting more affluent users to the brand instead of maybe being more aggressive, I guess, improve affordability for these aspirational users. Why is it a better strategy to be going after the more affluent user than maybe trying to improved affordability of an arguably a larger base of aspirational users?

Saed Mohseni

Well, I think, it is a combination of both. First of all, you know, we've always said that on an everyday basis, we have value on our menu. We continue to be in that segment. We believe that when you can come to Brio and Bravo and have lunch for $7.95 or $8.95, then we are well-positioned to capture that aspirational guest.

With that said, we also believe that there is a greater fight for that aspirational guest through substantial discounting at various segments, therefore we believe that having access to more affluent guests, would enable us to capture more of them. That doesn't mean that we are not focused on an aspirational guest. It simply means that we are also putting a greater focus in addition to the aspirational guest on a high-end users and that's why programs such as OpenTable, as feature card, such as the loyalty program is really meant to enhance our aspirational guests at the same time to capture the guests such as the business people that we currently don't get many of them.

Chris O'Cull - KeyBanc

Okay. That's helpful. Thank you.

Saed Mohseni

You are welcome.

Operator

We will take our next question from Will Slabaugh with Stephens. Please go ahead.

Will Slabaugh - Stephens

Yes. Thanks, guys. I wanted to come at same theme if I could and just ask you sort of what you are looking at in terms of data or whether it would be anecdotal that gives you confidence that it is predominantly that aspirational guest that's leaving you versus the combination of all income levels.

On that same point, I wondered if we should start thinking about maybe some of the e-mail or promotional offers and we have been getting that were more price point-driven, maybe some discount-driven, if that starts to go away now and it's more brand-driven and promotions are a little more chef-focused as you mentioned a minute ago.

Saed Mohseni

Sure. First of all, anything that you are getting is something that we have done and we will continue to do. We don't anticipate that any of those offers will go away. As we mentioned, programs such as the National Lasagna Day, celebrating The Pasta Month, all these programs will continue, so nothing is going to be taken away from capturing greater amount of aspirational guests, but we believe that we do have an opportunity to capture even greater amount of higher end guests. This is a really a two-pronged approach and one that we are focused on and may require greater amount of advertisement to achieve the goal, but it really is a two-pronged approach.

We will continue to focus on aspirational guests. At the same time, we have done many internal studies, external studies and the fact that you see our guest counts had Bravos dropped, but our check has grown. That also to give you a slight indication that the core guest that continues to come to Brio is continuing to come and where we are losing is the aspirational guest.

Will Slabaugh - Stephens

Okay. Then switching over to development really quickly if I could, can you go into a little bit more detail about how you are thinking about 2015? You mentioned, you didn't want to accelerate beyond from where you are, should I take from that the current six that you are building this year would be a just, as far as modeling purposes, a fairly good number to start with for next year?

Saed Mohseni

That will be correct.

Will Slabaugh - Stephens

Okay. Great. Thanks, guys.

Saed Mohseni

Thanks, Will.

Jim O'Connor

Thanks, Will.

Operator

We will take our next question from Imran Ali with Wells Fargo. Please go ahead.

Imran Ali - Wells Fargo

Hey, guys. Thanks for taking my question. Can you just talk about your top-line trends and how they progressed in the second quarter and also what your July same-store sales look like?

Jim O'Connor

Yes. I think the trends that we are so far in July are pretty consistent for what we saw Q2.

Imran Ali - Wells Fargo

Understood, can you talk about the cadence of how your comps moved in Q2?

Saed Mohseni

May and June were pretty consistent. Probably the best month was had was April, but May and June were pretty consistent in terms of cadence.

Imran Ali - Wells Fargo

Okay. Understood. Can you elaborate a bit more into intense competitive discounting that you are seeing and what kind of form that is taking?

Saed Mohseni

Well, I think that, as we are continuing to see discounting in all Casual Dining segment and we will continue to see aggressive promotional to capture that value-oriented guest, so you are seeing it across the board, you are seeing it in a broad market. Again, for us, we will continue to focus on the point of differential for the brand and try to capture the guests both, at the aspirational and the higher end to use Brio and Bravo more frequently through some of the programs that Brian outlined.

Imran Ali - Wells Fargo

Understood. Okay. Lastly, I may have missed this, but did you provide any G&A guidance and margin for the year?

Jim O'Connor

G&A guidance we provided is just a target of about $24 million overall in terms of G&A. Then broadly our guidance was between 16.5% and 17.7% in terms of our previous guidance for margin. I think it is going to be more in that 16.5% range for the year right now.

Imran Ali - Wells Fargo

All right. Understood. Thanks very much.

Operator

We will take our next question from Andy Barish with Jefferies. Please go ahead.

Andy Barish - Jefferies

Hey, guys. Just wondering, I mean, it's impressive on the cost management side and looks like it continues in the back half, but how do you prevent more deleverage on kind of the fixed and semi-fixed cost lines in labor and in occupancy with these negative mid-single digit comps. What are you kind of finding opportunities to tighten up with?

Saed Mohseni

Andy, you know, we have also always been be able to demonstrate our ability to manage a P&L statement. With that said though, unfortunately for both, Brio and Bravo are a high-volume restaurants, so there is always opportunity for us to take a look at efficiencies.

With that said, our focus is and will continue to be on the top-line and trying to turn the tide in terms of guest counts and comp sales, because if erosion in the margin will occur, if we continue to see a negative comp. We've done a good job, the team has done a fantastic job continuing to manage to manage the P&L side of the business. Our goal is to continue to grow the top-line to make that job a bit easier.

Andy Barish - Jefferies

You used to use the Chef feature cards a little bit more prominently as I recall. Is that something that you come back with that you are trying to drive a little check average with? Is that sort of the intent or manage through some of these commodity pressures?

Jim O'Connor

Yes. Andy, I think that that was something that in the past we felt had a great opportunity to showcase our executive Chefs. The talent that's inside the restaurants, so it also gives us the opportunity to, in a broader sense, kind of highlight some specific items at the higher end, but also kind of focusing as Saed was talking about those daily price point features as well.

Andy Barish - Jefferies

Thanks, guys.

Saed Mohseni

Thank you.

Operator

We will take our next question from Nicole Miller Reagan with Piper Jaffray.

Josh Long - Piper Jaffray

Hi. Thanks. This is Josh on for Nicole. I wanted to circle back to managing the conversation between the two different guests sets I [sought] the color around mobile and then the OpenTable toolsets was very helpful, but should we think about that as providing opportunity to proactively reach out and have that conversation with the two different guests or demographics or is that more for when both of them want to come and interface with your two brands, those tools are there to help facilitate that. I was trying to understand what might be more proactive versus just using the transaction that for when guests do come to visit you.

Saed Mohseni

Well, Josh, really, as I mentioned. It is a two-pronged approach and it is a proactive. Our goal is to be able to communicate the both of our guest base. We continue to build our database of our current guests who through our loyalty program. As Brian outlined, we will expand that program through Eat Repeat Rewards, which will give those guests an opportunity to come back more often and be rewarded as they come back. At the same time, we partner up with someone like OpenTable. It allows us to actually directly communicate with the potential guest, who are either looking for last-minute reservation or they are new in town looking for quality restaurants, one that they would recognize across the country.

We noticed as we continued to have a larger footprint, there is substantial more recognition of the brands across the country, so the goal with OpenTable and vehicles like that is to allow us to communicate directly to that guest, so it is a proactive role and the goal is to communicate to both of our base.

Josh Long - Piper Jaffray

Understood. Thanks for that clarification. Then, Jim, as we think about that COGS basket, looks like the outlook is more or less maintained. Are the individual pieces in their moving more or less to your expectation? I know shrimps has been a pressure point for a while, we have heard Mother's Day that potential some more supply might come on, so that could benefit in the back half, but just curious on what you are seeing on the individual pushes and pulls and if there might be any sort of opportunity even on the margins to those come in maybe towards the lower end of that range.

Jim O'Connor

Yes. I think, we are looking into that 3.5 to 4. I mean, they are probably more toward the upper end of the range. I think, most of the things are coming in as we anticipated. One of the things for shrimp, we wanted to lock-in supply for the end of the year and we have done that.

Then I think the only thing that's probably been a little bit higher than we anticipated, which I think everybody else was seeing too is dairy has been than we anticipated, but I think broadly in terms of the basket it's the same sort of drivers that we really mentioned last couple of quarters.

Josh Long - Piper Jaffray

Understood, so for the broader basket I think last time we had an update you were about 50% contracted. Have you been able to take that up a bit for the rest of the year? How should we think about that?

Jim O'Connor

I think in terms of Q3 and Q4, we are at 50 for the back half of the year. I anticipate that will go up somewhat here as we go through the third quarter.

Josh Long - Piper Jaffray

Understood. Thank you.

Jim O'Connor

You are welcome.

Operator

We will take our next question from Paul Westra with Stifel. Please go ahead.

Unidentified Analyst

Thank you for taking my call. [Michelson] on Paul Westra. I just had a question about the sequential change from first quarter to second quarter in your comp. Just looking at that gap to Navtrak it looks like there was quite a bit of difference in the performance. I was wondering if you guys can elaborate on the change. If maybe that might have been contributing at all by in closing of the two restaurants mid-quarter?

Saed Mohseni

No. I mean, I think, that obviously when you look at Navtrak, you are looking at a much broader base of restaurants. Keep in mind that our geographical footprint is much more concentrated in Midwest than any other restaurant that it is in Navtrak. Obviously every company has their own the ups and downs. For us the weaknesses has been in the Midwest, which probably is by far the largest market for us when you look at our comp sales compared to last year.

I mean I'm not really sure the other companies in Navtrak, what percentage of their footprint is in the Midwest.

Unidentified Analyst

Okay. Thank you for that color. I guess, I just had a follow-up question. On the previous conference call, you guys had mentioned some introductions of new happy hour entrées or promotional items. I was just wondering how you are calculating the traffic or transaction is impacted by these bar items.

Jim O'Connor

Yes. Just in terms of the traffic requested. The way we count traffic is by entrées count, so generally the increases in the bar will tend to plus or minus the average check and not just impact the traffic number.

Unidentified Analyst

Okay. Great. Thank you.

Operator

We will take our next question from Peter Saleh with Telsey Advisory Group. Please go ahead.

Peter Saleh - Telsey Advisory Group

Great. Thanks. Saed, I was just wondering if you just give us a little bit more color on geographic dispersion of comps. I mean, so the Midwest was weaker. What about the Southeastern Florida? What about the rest of the country? Was there part as a strength that you can call out?

Saed Mohseni

Absolutely, I mean, as you know, really the second largest market was Florida, and Florida continued to do well for us. Average volume in Florida is much higher than national average for. It has been a focus was continued to build in the market to not only level off the seasonality of our company, but also hedge against the Midwest a bit, so the Florida was a good quarter for us.

Peter Saleh - Telsey Advisory Group

Great. Jim, just quick on the pricing plans for the balance of the year, how much more price should we anticipate you guys taking for the rest of this year?

Jim O'Connor

Yes. We are going to end the year, historically we would say 1% to 2% in terms of our target. I think this year, you are going to see us closer to 1% to 1.5% in terms of an annual number. In terms of price, again, we are just being cautious with the price given the macro environment that we are in right now.

Peter Saleh - Telsey Advisory Group

Thank you very much.

Jim O'Connor

You are welcome.

Operator

(Operator Instructions) Next, we will take a follow-up question from Chris O'Cull with KeyBanc. Please go ahead.

Chris O'Cull - KeyBanc

Yes. Thanks. I just want to follow-up on the labor cost improvements. What I am looking at is kind of the labor cost per store weak, which has been down year-over-year. It looks like maybe the past eight quarters. How long should we expect that trend to continue?

Saed Mohseni

Well, Chris. I mean, I think the labor is not - we continue to evaluate our basis of operation. As I mentioned, I think, team had done a very good job of it, but I think the key the focus will continue to be on moving the top line because the quality of product to be produced, the quality of service that we provide those become the priority for us and the labor costs would eventually go up. That's why we are focused on the sales side of it, so to your question in terms of how long, I think we are getting into the tail end of the efficiencies in some of the labor metrics.

Chris O'Cull - KeyBanc

Based on your comp guidance for the rest of the year and your earnings guidance for the full-year, it looks like there is pretty good line of sight for labor savings through the next two quarters, because it doesn't sound like there is much deleverage expected the next two quarters, given the magnitude of the comp decline. I mean, is that fair that you guys have pretty good line of sight in terms of labor the next quarters?

Chris O'Cull - KeyBanc

Just simply because we don't anticipate any minimum wage increases or legal pressures taking in effect over the next two quarters why we have a pretty good insights into our labors for the next two quarters. Beyond that this is obviously we are going to take a look at a different perspectives.

Chris O'Cull - KeyBanc

Okay. Jim, was the reduction in occupancy cost on a dollar basis this quarter due to percentage rents?

Jim O'Connor

I think there were bunch of different items, but one of the drivers was also the percentage rents.

Chris O'Cull - KeyBanc

Okay. Great. Thanks guys.

Operator

That does conclude our question-and-answer session for today. I would like to turn the call back to management for any further remarks.

Jim O'Connor

Well, thank you so much everyone for being on our call. As always, myself, Jim O' Connor and Brian O’Malley are available to answer any questions that you might have.

Thank you, everyone, and have a pleasant day.

Operator

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation.

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