As a result of the expected loss, the locally based chain also revised its full-year guidance for 2006, saying it expects to lose between nine cents and 11 cents per share, excluding the effect of a stock-based compensation expense. Analysts had expected the restaurant chain to post a loss of 13 cents per share.
Kevin Armstrong, Cosi's president and CEO, said in a statement that the firm is concentrating on marketing initiatives and new food and beverage offerings to increase guest visits in a competitive economic environment. "We have seen some early, encouraging signs for rebounding consumer demand in recent weeks, but we believe it is prudent to maintain a cautious outlook for the remainder of the year," he says.
To temper the expected losses, he said the chain would adhere to strict cost disciplines, but would not abandon its growth plans, which has included the opening of 17 Cosi units since the beginning of the year. Two franchise locations also were opened during the third quarter.
The company said the openings contributed to a 7% growth in total revenues for the quarter ended Oct. 2. Construction of 17 additional franchise locations are planned with eight restaurants expected to be open by the end of the year, the company said. An early 2007 opening is planned for the remaining nine restaurants.
The company said that it also has secured commitments from 27 franchise developers for 296 Cosi locations, including 45, which are scheduled to open in 2007. The firm currently owns 109 company-owed locations and has eight franchisees. For the third quarter, Cosi reported total revenues of $33 million, compared to $30.8 million in the same quarter a year earlier.
Net restaurant revenues were up 6.4% to $32.8 million from $30.8 million in the prior year's quarter, while sales at restaurants opened more than 15 months were down 4.2%. The company said that although customer satisfaction remained at industry-leading levels and new guest visits grew by 3% in comparable restaurants, customer frequency was off for the quarter.
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