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August 8, 2014
12:46 EDTIRGIgnite Restaurant shares tumble after Q2 earnings miss expectations
Shares of Ignite Restaurant (IRG) fell steeply after the company reported second quarter earnings results that were lower than analysts' expectations. WHAT'S NEW: Ignite's Q2 adjusted earnings per share was 8c, which fell steeply below analysts' estimates of 24c. Revenue for the quarter was $229.8M, which also was lower than analysts' consensus of $238.74M. Ignite reported that comparable restaurant sales increased 8.5% at Brick House Tavern + Tap, decreased 4.7% at Joe’s Crab Shack and decreased 2.6% at Macaroni Grill during the quarter. WHAT'S NOTABLE: Chief Executive Officer Ray Blanchette cited "residual effects" of 2014 winter weather, as well as some cannibalization of Joe's Crab Shack sales as the company increased the number of locations in the Northeast over the past three years for the earnings miss. Blanchette said Macaroni Grill results were "generally in line" with internal expectations. The company's near-term development strategy is expected to provide further opportunities to expand the Brick House concept, Blanchette noted. The company closed three Macaroni Grill locations and three additional locations were closed in July. ANALYST REACTION: This morning, Raymond James downgraded Ignite to Underperform from Market Perform and CL King downgraded the company to Neutral from Buy. Piper Jaffray analyst Nicole Miller Regan said that although she was encouraged by the long-term growth strategy of the company's restaurant portfolio, she feels that there is softness in the Joe's Crab Shack division and sees "choppiness" in same-store sales at Macaroni Grill in the third quarter. The firm maintains its Overweight rating on Ignite's shares and reduced its price target to $14 from $17. PRICE ACTION: During afternoon trading, shares of Ignite fell $3.96 or 31.99%, to $8.42.
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