California Pizza Kitchen, Inc. (CPKI)
Q4 2009 Earnings Call Transcript
February 18, 2010 4:30 p.m. ET

Executives

Richard L. Rosenfield - Co-Chairman, Co-President & Co-Chief Executive Officer
Susan M. Collyns - Chief Operating Officer, Chief Financial Officer & Executive Vice President

Analysts

Rachel Schacter – Oppenheimer & Co.
Nicole Miller Regan - Piper Jaffray & Co.
Brad Ludington - KeyBanc Capital Markets Inc.
David Tarantino - Robert W. Baird & Company, Inc.
Larry Miller - RBC Capital Markets
Destin Tompkins - Morgan Keegan & Co., Inc.
Tony Brenner - Roth Capital Partners
Jonathan Raite - Presidio Research
Mitch Speiser - Buckingham Research Group
Stephen Anderson - MKM Partners
Tom Forte - Telsey Advisory Group
Conrad Lyon - Global Hunter Securities, LLC
Bryan Elliot - Raymond James & Associates
John Ivankoe – JPMorgan Chase & Co.

Presentation

Operator

Good afternoon. My name is Chastity and I will be your conference operator today. At this time, I would like to welcome everyone to the California Pizza Kitchen fourth quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers'' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn today’s call over to Mr. Rick Rosenfield, Co-CEO and Co-President of California Pizza Kitchen. Please go ahead.

Richard L. Rosenfield

Hello. And thank you, operator and good afternoon, everyone. Welcome to our fourth quarter 2009 earnings call. I am Rick Rosenfield, Co-CEO of California Pizza Kitchen, and with me on the phone today is my Co-CEO, Larry Flax, and Sue Collyns, our Chief Financial Officer and Chief Operating Officer.

Before we begin, I need to remind everyone that part of our discussion this afternoon will include forward-looking statements. They are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on our operating results, performance, and financial conditions.

To begin, I’d like to briefly review our fourth quarter and full year before addressing our plans for 2010. As you are all aware, the events of late 2008 and the subsequent recession led to a defensive strategy for most of the year. We opened fewer stores. We focused on cost management and shifted resources toward leveraging existing operations. These actions resulted in cost of sales improvement, limited labor deleveraging and controlled G&A costs in both absolute dollars and as a percentage of sales. And on the bottom line, our ability to quickly react enabled us to consistently meet or exceed expectations over the past four quarters.

Despite the economic volatility of 2009, we never lost sight of the customer. In fact, our guest focus was recognized in December by Zocalo Research as CPK took the esteemed position of number one, the most recommended casual dining chain in America. And our guest satisfaction scores back this up as we exceeded not only industry average; we exceeded our internal prior-year results as well.

As we concluded the 14-week fourth quarter, our revenues increased to $168 million and the comparable sales decline of 5.8% was in line with our original expectations despite the negative Halloween and Christmas calendarships. For the period we saw widespread sales improvement across our dine-in, take-out and delivery channels and we believe we saw and continue to see signs of a sustained comp turnaround.

That said, we are only halfway through the first quarter and severe winter weather in many parts of the country is certainly having an adverse and choppy effect. Easier comparisons certainly came into play in the fourth quarter. But we have also seen several initiatives meaningfully contribute to our momentum.

In the fourth quarter we rolled out a newly redesigned wine list featuring over 30 distinctive wines. Most are priced under $10 per glass although we are also finding guest receptiveness for premium options. Upgrading our wine offering and bringing it more in line with our reputation for cravable food helped drive our check average and guest satisfaction during the period.

Our November menu rollout has also been a success with eight new items including a Tuscan White Bean Minestrone Soup, Cranberry Walnut Chicken Salad Sandwich, an Albacore Tuna Salad Sandwich, fish and stake tacos, honey-wheat with whole grain pizza crust, a Multigrain Penne, and a White Chocolate Strawberry Cheesecake.

As a follow up to this menu launched on February 4th we released a small cravings menu. It consists of seven items priced between $3.99 and $6.50 and the early results are encouraging. As always these additions will help ensure that every CPK dining experience is innovative, distinct, and value oriented.

Off-premise is also an important part of our full service business. By the end of the first quarter, we will have all our stores utilizing our CPK call center. This is more efficient for our restaurants and guests.

So far we have seen our check average rise approximately 15% to 20%. Our off-premise initiative also includes a new catering channel so that people can enjoy a CPK experience at their homes or businesses that’s beyond take-out or delivery.