Saturday, May 15, 2010

O'Charley's stock plummets

It was a rough week for the Nashville-based casual dining chain O'Charley's, at least on Wall Street.
In the past two days, its stock fell 23 percent after weak first-quarter earnings that surprised stock analysts and called into question the company's latest strategy for growth. The stock fell $2.18 a share over two days of trading, closing at $7.12 on Friday.

O'Charley's reported a loss of $4.3 million, or 21 cents a share, for the first quarter after a push to reduce prices didn't pay dividends.

The casual chain, which faces stiff competition from other restaurants of a similar ilk, hoped to draw more customers with lower-priced entrees, but once at the table O'Charley's diners didn't spend as much on side items and drinks.

CEO Jeffrey Warne said people shunned appetizers, drinks and desserts, which the company had hoped would help balance out its lower-priced strategy for the main course. Profit margins took a hit.

Revenue fell 7 percent to $271.2 million from $291.4 million in last year's first quarter. The quarter was far worse than most Wall Street analysts had expected.

O'Charley's declined to project revenue and earnings for the year ahead, sending shares plummeting.

Revenue at O'Charley's restaurants open at least a year fell 6.7 percent, with a 1.2 percent decline in the number of guests and a 5.6 percent drop in their average spending. That's a key figure for because it measures existing business rather than sales from new locations.

The Associated Press contributed to this story.

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