J. Alexander’s Holdings, Inc. (NYSE: JAX) (the Company), owner and operator of J. Alexander’s, Redlands Grill, Stoney River Steakhouse and Grill and other restaurants, today reported same store sales results as well as certain other preliminary metrics related to its continuing recovery from the impact of the novel coronavirus outbreak (COVID-19).
During the third quarter, the Company has continued to see steady guest count recovery and increasing sales across its restaurant base. Sales volumes for the first three weeks of September 2020 averaged approximately 90.0% of 2019 sales for the comparable period. Average weekly same store sales(1) for recent fiscal 2020 periods as compared to the same periods of 2019 are as follows:
J. Alexander’s/Grill Restaurants
Stoney River Steakhouse and Grill
Second quarter (13 weeks)
July (4 weeks)
August (4 weeks)
September (through Sept. 13th (3 weeks*))
* Note that the Company’s third quarter of fiscal 2020 ends on September 29, 2020
In conjunction with the earnings release for the second quarter of 2020 dated August 4, 2020, the Company estimated the weekly cash burn rate for the third quarter of 2020 would be in the range of $325,000 to $375,000 per week and that the fourth quarter would see an improvement from a cash flow perspective, assuming continued sales improvement. Based on those assumptions, the Company anticipated that it would have adequate liquidity for 2020. The Company has continued to see sales improvements beyond the levels originally anticipated, and as a result has updated its original cash flow projections for the third quarter as well as the fourth quarter of 2020. These estimates, which include the proceeds from the closing of the sale of the Cleveland property on September 10, 2020 as well as required debt service payments and capital expenditure commitments (including the construction of one new location scheduled to be completed in the fourth quarter of 2020 and opened in the first quarter of 2021), now project that the Company will be breakeven to modestly cash flow positive for the third quarter of 2020. For the fourth quarter of 2020 (which contains 14 weeks due to the 53rd week in fiscal 2020), the Company expects to be cash flow positive in the range of $400,000 to $450,000 per week. The cash flow improvements reflected above for the third and fourth quarters of fiscal 2020 include the impact of better than anticipated sales across all concepts, a generally favorable cost of sales environment, continued operational efficiencies achieved at the restaurant level and the deferral of the planned construction start date of the J. Alexander’s in Madison, Alabama until January, 2021, among other factors.
As of September 14, 2020, the Company’s cash on hand totaled approximately $18.6 million.
Chief Executive Officer’s Comments
“As we’ve shared in previous communications, there will be winners and losers when the pandemic is over and our goal from the very beginning has been to be one of the winners,” stated Mark A. Parkey, President and Chief Executive Officer of J. Alexander’s Holdings, Inc. “The consistent improvement in our top line sales since all of our dining rooms were allowed to begin reopening in June, combined with the efficiency of those sales as reflected in improved restaurant operating margins over the past few months, lead me to conclude that we are well-positioned to achieve our goal and to do so sooner than we had originally envisioned.” Parkey noted that the significant improvements in sales have been achieved with virtually all restaurants continuing to operate under various seating limitations that differ from state-to-state across the Company’s 46 locations, with the consolidated average totaling approximately 57% of total seats available within the 46 restaurants. “The primary factors driving our rapid recovery thus far have been the strong support we have received from our great base of loyal guests and the tireless efforts of our employees who have risen to the occasion at all levels within the Company,” Parkey stated. “Our historical marketing research tells us that approximately 16% of our guests drive approximately 66% of our visits. That core group of guests has been the backbone of our recovery to this point, much as they were in the aftermath of the Great Recession of 2008-2009. In addition to supporting us in our dining rooms, they have supported our carry out business in a tremendous way, with sales of $600,000 - $700,000 each week over the past 10 weeks, even as the dining rooms ramped back up.” Parkey added, “Our culinary team has been working diligently to come up with “Family Pack” offerings that will appeal to a broad variety of our guests and we are confident that, as we enter the 2020 holiday season, we will be well positioned to meet their needs whether at home or in our dining rooms.”
“August was a critical month for our recovery efforts and represented a key turning point,” Parkey summarized. “Based on quarter to-date performance, we expect to generate positive Adjusted EBITDA(2) for the third quarter. Our sales trends, improving margins and our ability to maintain our carry out volumes even as the dining rooms have generated steadily increasing sales, all indicate that the worst of the storm has passed. While we are still aware of the hurdles that remain on the horizon, and we are still taking abundant precautions within all of our restaurants to ensure the health and safety of our guests as well as our employees, we are extremely excited about the opportunity in front of us to emerge from the pandemic a stronger company than we were a few short months ago.”
(1) Average weekly same store sales per restaurant is computed by dividing total restaurant same store sales for the period by the total number of days all same store restaurants were open for the period to obtain a daily sales average. The daily same store sales average is then multiplied by seven to arrive at average weekly same store sales per restaurant. Days on which restaurants are closed for business for any reason other than scheduled closures on Thanksgiving and Christmas are excluded from this calculation. Sales and sales days used in this calculation and amounts of other “same store” figures in this release include only those for restaurants in operation at the end of the period which have been open for more than 18 months. Revenue associated with reduction in liabilities for gift cards, which is recognized in proportion to guest redemptions based on historical redemption rates and commonly referred to as gift card breakage, is not included in the calculation of average weekly same store sales per restaurant. Average weekly same store sales are computed from sales amounts that have been determined in accordance with U.S. generally accepted accounting principles (GAAP).
(2) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, or “Adjusted EBITDA,” is defined as net (loss) income before interest expense, income tax expense (benefit), depreciation and amortization, and adding asset impairment charges and restaurant closing costs, loss on disposals of fixed assets, transaction, contested proxy and other related expenses, non-cash compensation, loss from discontinued operations, and pre-opening costs. Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors because it provides information regarding certain financial and business trends relating to our operating results and excludes certain items that are not indicative of our operations. Adjusted EBITDA does not fully consider the impact of investing or financing transactions as it specifically excludes depreciation and interest charges, which should also be considered in the overall evaluation of our results of operations.
About J. Alexander’s Holdings, Inc.
J. Alexander’s Holdings, Inc. is a collection of restaurants that focus on providing high quality food, outstanding professional service and an attractive ambiance. The Company presently operates 46 restaurants in 16 states. The Company has its headquarters in Nashville, TN.
For additional information, visit www.jalexandersholdings.com
This press release issued by J. Alexander’s Holdings, Inc. contains forward‐looking statements, which include all statements that do not relate solely to historical or current facts, such as statements regarding our expectations, intentions or strategies regarding the future, including the impact of the COVID-19 pandemic on our operations, cash needs, liquidity and financial results, and cost-containment efforts. These forward‐looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future financial and operating results and other events and are not statements of fact, actual results may differ materially from those projected and are subject to a number of known and unknown risks and uncertainties, including the health and financial effects of the COVID-19 pandemic; the Company’s ability to reopen its restaurants for in-person dining at normal capacities, and thereafter to reestablish and maintain satisfactory guest count levels and maintain or increase sales and operating margin in its restaurants under varying economic conditions; the effect of higher commodity prices, unemployment and other economic factors on consumer demand; increases in food input costs or product shortages and the Company’s response to them; the Company’s ability to obtain access to additional capital as needed; the Company’s ability to comply with new financial covenants under its loan agreement with its lender; the impact of any impairment of our long-lived assets, including tradename; the Company’s ability to defer lease or contract payments or otherwise obtain concessions from landlords, vendors and other parties in light of the impact of the COVID-19 pandemic; the number and timing of new restaurant openings and the Company’s ability to operate them profitably; competition within the casual dining industry and within the markets in which our restaurants are located; adverse weather conditions in regions in which the Company’s restaurants are located; factors that are under the control of third parties, including government agencies; the Company’s evaluation of strategic alternatives; as well as other risks and uncertainties described under the headings “Forward-Looking Statements,” “Risk Factors” and other sections of the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2020, as amended on April 17, 2020, and subsequent filings, including under the heading “Risk Factors” in its Quarterly Report on Form 10-Q filed with the SEC on August 6, 2020. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Chief Financial Officer