The company will open between 35 and 38 new Pei Weis next year, with a larger proportion to be opened in new or underpenetrated markets, including Detroit, Tampa, Fla., Memphis, Miami, Boston, and metro Philadelphia. The company also plans to open 18 to 20 new Bistros next year.
Though second quarter revenues rose 14% to nearly $226 million, comparable-store sales decreased 1.0% at the Bistro and dropped 3.9% at Pei Wei. Net income declined to $8.1 million from $9.3 million, in part because of accounting changes. Now, the company has cut its comp-sales expectations for both the Bistro and Pei Wei, as diners literally tighten their belts.
"You have to go back over 15 years to find an environment where the consumers has responded as they are today," said Rick Federico, chairman and CEO, later adding that in 1991 consumers also were coping with a Middle East war and economic woes. "But we do not believe the current environment will be extended into the future."
Comp-store sales growth projections were cut from gains of 2.6% and 1.5% in the third and fourth quarters, respectively, to a 0.1% decline in the third quarter and flat sales in the fourth quarter. Pei Wei's comp-store sales, previously expected to rise 1.4% in the third quarter and 2.4% in the fourth quarter, are now projected to drop 2.4% and 1.1%, respectively.
"We understand that there is no silver bullet solution to our current challenges," Federico said. "But history tells us this is a time to invest in our team, our products and our service. Even in a difficult environment for our industry and our company, we will continue to grow our business."
But plans could change, dictated by financial results. The 2007 Bistro development plan is in line with its growth in previous years.
"We'll continue to build restaurants as long as the returns warrant the investment," said Bert Vivian, president of the Bistro division. "If that's 50 restaurants, great. If it's 250 restaurants, great."
The company's newest concept, Taneko Japanese Tavern, is on schedule to open in Scottsdale in early fall. Thus far, there are no plans to expand.
"We will take our time evaluating [Taneko], and then determine whether it has any potential," said Mark Mumford, corporate CFO.
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