UPDATE 5-P.F. Chang's results, outlook miss -- shares drop

Wed Oct 21, 2009 3:24pm EDT

* Q3 EPS 27 cents vs Wall Street view of 31 cents

* Raises '09 EPS view, but still below Street

* Sees Q4 revenue $318 mln-$320 mln

* Shares fall more than 7 percent (Adds company and analyst comment, byline; updates share activity)

By Lisa Baertlein

LOS ANGELES, Oct 21 (Reuters) - P.F. Chang's China Bistro Inc PFCB.O posted lower-than-expected quarterly profit and revenue on Wednesday, hurt by weak sales at both of its restaurant chains, and shares fell more than 7 percent.

The operator of the P.F. Chang's China Bistro and Pei Wei Asian Diner chains also raised its full-year earnings outlook, though the new forecast was still below Wall Street expectations.

Full-service restaurants like P.F. Chang's have suffered from the lingering recession, with many slashing costs and offering discounts to attract diners.

Net income at the upscale Chinese restaurant was $6.2 million, or 27 cents per share, in the third quarter, up from $3.0 million, or 12 cents per share, a year earlier, when one-time charges hurt results.

Revenue in the latest quarter fell to $290.3 million from $295.9 million a year earlier.

Analysts on average were expecting earnings of 31 cents per share on revenue of $295.8 million, according to Thomson Reuters I/B/E/S.

Sales at restaurants open at least 18 months fell a steeper-than-expected 8.5 percent at its namesake restaurants, as traffic declined and consumers spent less on meals. Sales slipped 0.7 percent at the newer and smaller Pei Wei chain.

The result contributed to Standard & Poor's Equity Research analyst Mark Basham's decision to maintain his "sell" opinion on the company's shares.

"We note our ongoing concern that cost cuts are having a material adverse impact on restaurant operations. We think (third-quarter) sales adds further support to this view," Basham said.

RBC Capital Markets analyst Larry Miller said P.F. Chang's had warned investors that the benefits from cost savings would not last forever and that the company's 10.6 percent restaurant margin was weaker than expected.

Rival Brinker International Inc (EAT.N) said on Tuesday that its continued reliance on aggressive discounts to woo customers was eating into profits. In particular, it cited a promotion at Chili's Grill & Bar designed to feed two people with two entrees, a shared appetizer and dessert for $20. [ID:nN20262443]

P.F. Chang's said it now expects 2009 earnings per share from continuing operations of $1.70 to $1.75 per share, up from its prior forecast of $1.60 to $1.65.

Analysts on average were expecting $1.77 per share, according to Thomson Reuters I/B/E/S.

The company said it expects average weekly sales for the current fourth quarter to fall about 6 percent at its namesake restaurants and rise about 1 percent at Pei Wei.

It expects fourth-quarter revenue of $318 million to $320 million. Analysts have been expecting $320.9 million, according to Thomson Reuters I/B/E/S.

"I have a hard time believing that 2010 will be worse than 2009 with respect to the consumer," co-Chief Executive Bert Vivian said on a conference call with analysts.

The company said it plans to open five new P.F. Chang's and two new Pei Wei restaurants during the fourth quarter, and five P.F. Chang's and five new Pei Wei restaurants in 2010.

Shares in P.F. Chang's were down 7.6 percent at $31.09 in late afternoon trading on Nasdaq. (Additional reporting by Martinne Geller in New York Dave Zimmerman and Gerald E. McCormick)

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