After posting tepid 2Q2016 results, Kona Grill Inc (NASDAQ:KONA) believes it is time to slow down the pace of development and preserve cash. The management said that move will increase the company’s earnings power and increase balance sheet flexibility.
But cutting of development will start in 2017 and no estimates were provided about how the cut will be undertaken. In the meantime, Kona has announced a reduction of its 2016 restaurant sales guidance.
What happened in 2Q?
Overall, Kona Grill Inc (NASDAQ:KONA) disappointed because the revenue and EPS figures that it reported all fell short of the consensus estimates. But the management still praised the results because the company still managed to register growth despite industry headwinds.
On the topline, Kona reported restaurant sales of $43.3 million in 2Q, which compared to the same quarter last year, increased 19.5%. But analysts believed that the prevailing conditions would have allowed the company to generate sales totaling $45.41 million.
Kona explained that the double-digit growth of sales in the latest quarter was supported by strong sales in some 7 stores that opened downs to customers in late 2015.
Coming to the bottom-line, Kona posted EPS loss of $0.08, wider than EPS loss of $0.01 a year ago and worse than $0.05 that analysts estimated on the average.
Same-store sales up
In terms of store performance, Kona Grill Inc (NASDAQ:KONA) said same-store sales rose 2.5% in the latest quarter compared to 1% in the year-ago quarter. That saw the company register same-store growth in 23 quarters in the late 24 quarters.
Higher pricing combined with favorable menu mix support the gain in same-store sales.
Kona Grill Inc (NASDAQ:KONA) cut sales guidance for 2016 to $176 million, which if you compare with 2015 sales still imply a 23% YoY growth. But the company earlier guided 2016 sales of $179 million. The new sales guidance is falls short of $178 million that analysts are expecting for the year.
Going forward, it will be interesting to see how slowing down development pace helps Kona Grill Inc (NASDAQ:KONA)’s bottom-line.