UPDATE 2-McCormick & Schmick's swings to loss; shares sink

(Adds details)

Feb 20 (Reuters) - McCormick & Schmick's Seafood Restaurants Inc (MSSR.O) swung to a surprise quarterly loss, hurt mainly by higher costs, and forecast 2008 earnings below market estimates, sending shares down nearly 18 percent in trading after the bell.

The company said it expects continued sales declines due to current macro economic issues and forecast 2008 earnings of 64 cents to 74 cents per share, on revenue of $410 million to $420 million.

"Our fourth quarter was a challenging period for McCormick and Schmick's, with the decline in comparable sales causing margin deterioration," Chief Executive Douglas Schmick said in a statement.

The company reported a net loss of $1.0 million, or 7 cents a share, for the fourth quarter, compared with a net income of $4.8 million, or 33 cents a share, in the year-ago period.

Excluding impairment charges and a pending legal settlement, the company said it earned 24 cents per share on a pro forma basis. Revenue rose 18 percent to $99.5 million in the fourth quarter.

Analysts were expecting earnings of 26 cents a share, before special items, on revenue of $98.5 million, according to Reuters Estimates.

The Portland, Oregon-based company said it does not see any meaningful turnaround in the near term, at least not in the first half of 2008, and forecast comparable restaurant sales to decline 2 percent to 4 percent for the year.

McCormick & Schmick's, which had surged in early January on buyout speculation, fell to $10.50 Wednesday in after-hours trading. The shares have lost more than half of their value over the last year.

McCormick & Schmick's trades at nearly 14 times its estimated earnings for the year compared with the sector average of 18.5 times. (Reporting by Aditi Samajpati in Bangalore; Editing by Gopakumar Warrier, Jarshad Kakkrakandy)