BJs RESTAURANTS INC Q1 FY2025 earnings call

• Strong comp sales performance driven by significant traffic growth, with January and March comp growth at approximately +3%, though February was impacted by adverse weather and delayed tax returns.
• Margin expansion achieved through operational initiatives, including improvements in POS and KDS systems, and a proactive facilities program leading to a 4% reduction in R&M spend.
• Success with the Pizookie Meal Deal and Platter, which resonated with guests and drove traffic. The Pizookie Platter generated over 57 million organic social impressions and saw a 17 times increase in sales from the previous run rate.
• Focus on team member experience with initiatives like simplification and training, including new manager training and a refreshed certified training manager program.
• Menu optimization efforts, including renovating the signature pizza platform with improvements to crust, sauce, cheese, and pepperoni, and identifying opportunities to optimize menu offerings around core pillars.
• WOW Hospitality efforts with evolving AI forecasting model and labor scheduling to ensure team members are in the right place at the right time.
• Atmosphere freshening through remodels, with eight completed in 2025 and 20 more planned, and a new restaurant opened in Queen Creek, Arizona, performing well.

In the first quarter, BJ's Restaurants generated sales of $348 million, which was 3.2% higher than the previous year. On a comparable restaurant basis, Q1 sales increased by 1.7% driven primarily by 2.7% traffic growth. Restaurant-level operating margin was 16%, representing a 100 basis point improvement year-over-year, and adjusted EBITDA margin was 10.2%, a 150 basis point improvement year-over-year. The Pizookie Platter contributed to traffic growth and sales, with over 57 million organic social impressions and over 24,000 units sold.

• Raised profit guidance: expects restaurant-level operating profit of $210 million to $219 million and adjusted EBITDA of $131 million to $140 million.
• Increased share repurchase range by $5 million to $45 million to $55 million.
• Anticipates full-year comparable restaurant sales in the 2% to 3% range and capital expenditures of $65 million to $75 million.
• Takes into account current inflation expectations, including potential tariff impacts, with approximately 85% of food sourced domestically or from USMCA countries exempt from tariffs, and modest potential for extra food inflation in the second half.

• Tariff impact on food costs: 15% of the food basket could have modest impact in Q2 and potential extra inflation in the second half, with a potential 30 basis point headwind to restaurant-level margins starting later this year if tariffs remain unchanged.
• Fluid tariff situation that could impact other costs like small wares, to-go packaging, and equipment for repairs and new restaurants.

Q: Congrats on the quarter. Really good margin performance. The cost of goods and labor really stood out. I was thinking maybe you could help us frame up the magnitude of the impact from some of the incremental simplification and process changes you've taken and -- just trying to get a sense for where restaurant level margins maybe would have been if these actions were in place for the full quarter, if they -- I imagine they were implemented over the course of the quarter, but maybe you could update us on that. And just if you see any opportunities to reinvest some of these savings back into the guest experience as you look ahead?

A: Alex, thanks for the question. I'll say, I mean, with the 100 basis point margin improvement year-over-year, about half of that was leveraging sales, the extra traffic and sales that we drove. But yes, then we saw some really great performance really on the labor side. And I would say we finished 2024 strong. We had a strong finish to Q4 and really saw those benefits continuing into Q1. So this really is -- it is building to a degree, but I would say that it was fairly consistent through the quarter. So as we updated our guidance, it is expecting now a continuation of these levels. When Lyle mentioned rolling out our -- using AI to both forecast and now schedule labor, that's really in a small subset of restaurants. So if any of that's incremental. So yes, I don't -- as I think of reinvesting in the business, I think we're taking a very balanced approach to getting efficiencies from the business, but we're also taken a fairly modest amount of price. So we have a really nice balance right now of being able to drive traffic in with a great value message as well as delivering these profits. So it feels like we're in a good balance here of investing in the business, but using that to drive traffic and still being able to deliver these margins. So yes, I don't foresee any new investments there.

Q: Your same-store sales trends are just -- are holding up really well. You talked about the plus 3% in March and then holding up into April. And obviously, you guys are taking share, which is a big positive. But what's your hypothesis on why the casual dining customer seems to be holding up so much better than the quick service customer and the quick casual customer, which they're seeing much softer trends in that segment. How are you guys thinking about what's going on?

A: Hi. This is Lyle. And I'm just polishing up my crystal ball answers. But the -- look, I mean, I can speak more to, I think, what we're seeing in the BJ's customer than I can more broadly than that. And I think there's a few things when I think about our performance. One is the BJ's customer tends to be a little higher income than the average. And so -- and that's for both CDR and QSR. So I think there's some resiliency there. I think overall, we continue to improve our execution, and we have a strong value platform and craveable product news in snickers and the wing sauces. And I think all of that is reflected in our consumer scores that I mentioned earlier. So I think those things together are helping us hold up. I also believe that in times of uncertainty, and I think this will be true going forward, when consumers may have less transactions to give, they're really focusing on that experience being worth it. And I think our atmosphere service in food is compelling in that regard. And then I guess the last thing I would posit is that our recently completed brand work underlines that from a BJ's perspective, we over-index and win in these kind of everyday celebration and treat occasions. So we call them social splurge occasions. They're not like the big celebrations, although we do well there, too, but rather those kind of weekly moments when people plan for going out and they value those. And I think those occasions are pretty resilient, where I think some other occasions may be more transactional and easier to pass up. So that's kind of my perspective, obviously, through the lens of our consumer and our brand.