Nashville-based O'Char-ley's Inc. reported a $7.8 million net loss in its second- quarter earnings, released Thursday.
The company said it was hurt by higher labor costs, fewer customers, and plummeting sales at all three of its restaurant concepts.
"These continue to be challenging times for most casual dining companies, including O'Charley's Inc.," Gregory L. Burns, chairman and chief executive officer of O'Charley's Inc., said in a statement.
"Higher energy and food prices, lower home values, and generally negative economic news have made consumers more cautious about their spending."
The results come about two years after the company announced its ambitious re-branding initiative at O'Charley's and Ninety Nine Restaurants to help improve business.
The initiative includes remodeling, operational improvements and improving customer service.
The company said Thursday it would defer the rest of the re-brandings until after 2008, adding that it still views the program as a success.
The company said it has re-branded 62 O'Charley's restaurants and 62Ninety Nine Restaurants, about a third of its total 368 restaurants.
The company said the restaurants that have undergone re-branding outperformed those in the same concept categories that have not.
Analysts have doubtsSome analysts said it's difficult to calculate exactly how profitable the effort is.
Bryan C. Elliot, senior restaurant analyst with Raymond James & Associates, said it's impossible to measure "how bad things would be" without the re-brandings.
"Are they earning strong returns on the investment required to execute the re-branding with comps slightly negative?
"That remains uncertain," Elliot said, referring to weaker same-store sales that were reported Thursday.
Sales at restaurants opened at least a year declined in all three of the company's restaurant concepts.
Same-store sales declined 1.4 percent at O'Charley's company-owned restaurants, the best performance since the third quarter in 2006.
Same-store sales also declined 3.1 percent at Ninety Nine Restaurants and 6.4 percent at its upscale restaurant Stoney River Legendary Steaks.
Overall, the company's revenue fell 3.3 percent in the second quarter to $221.1 million, compared with about $228.8 million a year ago.
The company had a $1.9 million impairment charge relating to three restaurants and a $2.5 million charge for its re-branding initiatives.
"I'm disappointed for our results for the quarter.
"Our results could have been and should have been better," Burns said in a conference call Thursday with analysts.
Casual dining companies have been harder hit by the economy because their consumers are not spending as much on sit-down dining, analysts said.
"The consumer can still meet their daily feeding requirements while spending less money," said analyst Robert Derrington with Morgan Keegan & Co.
The company also scaled back its full-year guidance Thursday.
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