Rubio's earnings dropped 27 percent in the third quarter, marking the sixth consecutive quarter of declining profits at the Carlsbad-based restaurant chain.
Rubio's said yesterday that it earned $600,000, or 6 cents a share, for the quarter ended Sept. 24. Revenue was $38.8 million, up 6.1 percent from the year-ago quarter.
The Mexican-themed fast-food chain last saw profits rise – when measured year over year – in the first quarter of 2005.
“We aren't getting sales high enough over the short term to offset increases in restaurant operational costs,” said Rubio's chief financial officer John Fuller.
Among the problems facing the company in the quarter were higher accounting costs for employee stock options and higher costs for opening new stores that had been “re-imaged” with new lighting, murals and umbrellas, Fuller said.
Rubio's said same-store sales increased 1.8 percent in the third quarter, compared to an increase of 0.3 percent in the same period last year.
Same-store sales, sometimes known as comparable-store sales, are sales at stores open at least one year. They are often considered a key indicator of a retailer's health because they exclude sales from new stores, allowing a more direct sales comparison between two years.
Analysts said it was too soon to tell if new president and chief executive Daniel Pittard, hired in August, has had an effect on Rubio's direction.
Fuller said his boss is working closely on new product development and on increasing the company's catering business for large events. Pittard “knows the way to drive shareholder value is to increase comparable-store sales,” Fuller said.
For the quarter, Rubio's said sales transactions decreased by 1.2 percent, while the average check increased 3 percent.
Rubio's, which operates, licenses or franchises more than 160 restaurants in five states, said it opened three new outlets in the quarter. The company plans on opening five new stores by the end of the year, and said it is still targeting new restaurant openings in 2007 of 10 percent to 15 percent.
Analysts said Rubio's has been forced by tight competition from La Salsa and other chains to transform its longtime image from a purveyor of fish tacos into a restaurant chain with a wide variety of menu items.
“It's not the same company it was a long time ago,” said Bud Leedom, publisher of The California Stock Report. “The market is ultra-competitive, and Rubio's in the past expanded into markets where it couldn't readily compete.”
Rubio's said it is continuing to move from a quick-serve chain into fast-casual territory, where competitors such as Chipotle reside. In January, for instance, the company will introduce grilled salmon tacos and burritos with roasted corn salsa.
Shares of Rubio's closed yesterday at $9.21, up 1 cent, on the Nasdaq.
Frank Green: (619) 293-1233; frank.green@uniontrib.com
