* Raises Q1 outlook because of cost cutting
* Lower cheese prices help
* Shares rise 6 pct
(Adds Ruby Tuesday, analyst, changes dateline, previous
By Sue Zeidler
LOS ANGELES, April 8 Cheaper cheese and other
diminished costs boosted the bottom line for California Pizza
Kitchen Inc CPKI.O, which raised its first-quarter outlook on
Wednesday in a move that followed other dining chains'.
Analysts said California Pizza and Ruby Tuesday (RT.N),
which on Tuesday posted an operating quarterly profit that beat
expectations, were surpassing initial expectations by Wall
Street analysts as the companies cut costs more aggressively
than expected to battle declines in consumer spending.
Shares in California Pizza -- whose yellow-and-black
palm-tree insignia marks 250 restaurants around the world --
rose 6 percent after it said in preliminary first-quarter
results it foresaw a profit of 9 cents to 10 cents a share for
the quarter ended March 29, versus 3 cents to 5 cents a share
Analysts covering the Los Angeles-based purveyor of
unconventional menu items such as Thai Chicken and Barbecue
Chicken pizzas had been looking for first-quarter earnings of 5
cents per share, according to Reuters Estimates.
Chili's Grill & Bar parent Brinker International Inc
(EAT.N) this week also forecast a better-than-expected profit
for its most recent quarter.
"Our expectations were relatively modest, but companies
responded to the difficult environment by being more aggressive
and effective in cutting costs in areas that did not hurt the
dining experience," said Destin Tompkins, analyst with Morgan
California Pizza has more efficiently managed its labor
expenses, costs of operation and waste, while falling prices
for meat, dairy and utilities also boosted margins, he said.
Analysts said savings on dairy expenses in particular were
a big factor for California Pizza.
"The upside was largely due to the company's new focus on
cost savings that aided nearly every line item as well as a 30
percent reduction in cheese costs year over year," said RBC
Capital Markets analyst Larry Miller, who raised his 2009
earnings-per-share estimate to 69 cents from 66 cents due to
the better-than-expected first-quarter earnings.
California Pizza Kitchen, which added just one full-service
restaurant in the first quarter, in Massachusetts, said revenue
for the period slipped 2.2 percent to $161.1 million.
Comparable restaurant sales fell about 5.9 percent in the
Mid-tier restaurant operators like Ruby Tuesday saw
traffic fall before the recession started in December 2007 and
have been among the hardest-hit as budget-conscious diners eat
at home more or at lower-priced chains to save money.
Analysts believe the entire restaurant industry has seen
sales trends improve modestly each month.
"We believe lower gasoline prices, greater stability in the
stock market, and beneficial weather supported a sequential
improvement," Robert W. Baird's David Tarantino wrote in a
research note on Wednesday.
California Pizza Kitchen shares rose to $15.72 in
after-hours trading after closing at $14.80 on Nasdaq.
The company will report its final fiscal first-quarter
earnings on May 7.
(Reporting by Sue Zeidler; Editing by Edwin Chan, Gary Hill)