Q4 2024 BJ's Restaurants Inc Earnings Call
Speaker Change: Good afternoon, and welcome to the BJ's Restaurant's 4th Quarter 2024 Earnings Release Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.
Rana Schirmer: Thank you, Operator. Good afternoon, everyone, and welcome to our fiscal 2024 fourth quarter investor conference call and webcast.
Speaker Change: I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Speaker Change: Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements.
These statements are based on management's current business market expectations.
Speaker Change: and our results could differ materially from those projections in the forward-looking statement.
Speaker Change: We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise, unless required to do so by the securities laws.
Speaker Change: Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission.
Rana Schirmer: We will start today's call with prepared remarks from Brad Richmond, our Interim Chief Executive Officer, followed by Lyle Tick, our President and Chief Concept Officer, and Tom Houdek, our Chief Financial Officer. After our prepared remarks, we will take your questions. And with that, I will turn the call over to Brad Richmond. Brad? Thank you, Rana, and good afternoon, everyone.
Rana Schirmer: We appreciate you joining us today as we discuss our fourth quarter and full year 2024 performance, as well as our outlook for 2025.
Rana Schirmer: Before we dive into our results, I'd like to take a moment to acknowledge the devastating impact of the wildfire here in the Los Angeles area.
Rana Schirmer: Our thoughts and prayers go out to everyone affected by these fires. I want to express our deep gratitude to the first responders who worked tirelessly in these challenging conditions.
Rana Schirmer: I'd also like to extend a heartfelt thank you to our local restaurant leaders, team members who have gone above and beyond providing support to the first responders and local residents, offering meals, refreshments, and even safe spaces for those affected by the fires.
Rana Schirmer: We couldn't be prouder of their community engagement and spirit of generosity.
Rana Schirmer: We also know that some of our team members have been directly impacted and a few have tragically lost their homes.
Rana Schirmer: BJ's Team Member Support Fund, which we call Give a Slice, came to the aid of these members in their time of need. The fund is supported by voluntary donations from team members who contribute from each of their paychecks.
Rana Schirmer: We are grateful for their generosity and support of the BJ's family.
Rana Schirmer: Now turning to the fourth quarter, I'm pleased to report that the breadth of our momentum of our progress is clearly reflected in our financial performance.
Comparable, same restaurant sales, we're very strong.
Rana Schirmer: Margins continue to improve and our cash flow is both resilient and increasing. What's even more exciting is that there's still ample opportunity to build upon these achievements and further strengthen each of these key financial metrics as we move forward.
Rana Schirmer: We made significant progress on our first phase of initiatives and I'm impressed by what we've accomplished in such a short time.
Rana Schirmer: This progress also fuels my optimism as I see more untapped potential for the BJ's brand in the near term.
Rana Schirmer: Our early goals have been met, the foundation is strengthening, and we now have more clarity and actual plans in place to drive future success.
Speaker Change: To provide deeper insights into our recent progress and near-term initiatives, Lyle will discuss our brand positioning efforts and growth plans later in the call, and Tom will review our fourth quarter and annual results and share our expectations for 2025.
Speaker Change: But before he does, let me quickly recap our fourth quarter financial results.
Speaker Change: Comp sales for the quarter were 5.5% driven primarily by guest traffic with strength across all day parts and all channels.
Speaker Change: Each month of the quarter, we delivered sales meaningfully above the black box benchmark levels.
Speaker Change: Also important to note, the Cooley comps did benefit by approximately 100 basis points from favorable holiday shifts.
Speaker Change: Our Margin Enhancement Initiatives began to deliver meaningful results late in November and leveraged our top-line growth to achieve restaurant-level margins of 15.4 percent, up 100 basis points to last year.
Speaker Change: Restaurant level operating profit reached $52.9 million, a 14% increase to last year, which set a record for Q4 restaurant profitability.
Speaker Change: Adjusted EBITDA was $33.1 million in the fourth quarter, a 21% increase from the prior year.
Speaker Change: Our adjusted EBITDA margin was 9.6%, 120 basis points improvement from last year, and we were able to deliver this significant profit growth while making meaningful investments in brand positioning initiatives.
Speaker Change: In the fourth quarter, we engaged in significant work around strengthening our brand and business model, leveraging external resources to increase the certainty and accelerate the pace of our efforts.
Speaker Change: Lyle will go into more detail on this shortly, but we are energized by the preliminary insights and are excited to bring these fresh perspectives to life.
Speaker Change: Additionally, we made some key leadership changes. The charges for these two items increased.
Speaker Change: GNAs approximately 100 basis points in the quarter but are largely transitory and already behind us with only a small amount remaining for the first half of 2025.
Speaker Change: We also conducted a thorough review of our restaurant portfolio and determined that no restaurants needed to be closed.
We also reassessed our new restaurant pipeline.
Speaker Change: Applying a more refined set of criteria, which we believe will lead to more consistency in our new restaurant opening performance.
Speaker Change: This led to the removal of some sites from our new restaurant pipeline as they no longer meet our revised criteria.
Speaker Change: These two reviews were the primary drivers of the charge for asset disposals and impairments in the quarter, which I remind you is a non-cash item and does not impact our restaurant's operations.
Speaker Change: In summary, Q4 was a strong quarter with meaningful progress across multiple areas.
Speaker Change: I want to extend my thanks to Lyle, our leadership team, and our 21,000 plus team members for their hard work and agility in delivering these results in quick order. Their efforts have laid a solid foundation as we move into 2025.
Speaker Change: With that, let me turn it over to Lyle to talk more broadly about our brand refresh and growth initiatives.
Lyle Tick: Thank you, Brad. Good afternoon, everyone. And thank you for taking the time to join us today.
Speaker Change: I'm now five months into my role at BJ's Restaurant and Brewhouse, and I'm very encouraged by the progress we're making driving sales and traffic, as well as identifying opportunities to operate more efficiently and simply.
Speaker Change: While we're at the beginning of the journey, and there's lots of work ahead, we're getting clear on our core equities, where we can drive differentiation, while also putting in place the right initiatives to drive sustainable and profitable growth.
Speaker Change: We're at an exciting juncture for the BJ's brand, building on positive sales and margin performance in Q4, while also sharpening our focus for the future.
Speaker Change: Before I look ahead I'd like to briefly double click on Q4. We're pleased with our sales performance as well as our margin expansion initiatives.
Speaker Change: Importantly, we believe we can continue to build upon these initiatives in the near term, which will provide learnings to inform our future actions.
Speaker Change: On the sales side, the bazooki meal deal and our holiday large party offering resonated with guests and our targeted marketing investment served as an accelerator in key markets.
Speaker Change: Well, our performance across geographies, days, and day parts were all encouraging. Our performance on the weekend, when the promotion was not offered, and overperformance in media markets
Speaker Change: underline awareness and consideration headroom for the brand, as well as brand affinity when we are top of mind. It also underlined a real structural advantage we have in accommodating and delivering great experiences for group occasions.
Speaker Change: On the margin enhancement side, we made progress laying the foundations of initiatives that will help us be more efficient, but most importantly, will help us improve guests and the team member experience.
Speaker Change: Our AI forecasting model has continued to improve and is helping our GMs improve food preparation plans, as well as labor scheduling and having the right people in the right place at the right time.
Speaker Change: We also took a hard look at our comped food and beverages, as these generally result in difficult situations for team members, less than ideal guest experience, and they slow the restaurants down overall.
Speaker Change: We identified the key driver was items being rung in wrong or prepared wrong and that the root cause was complexity in how we ring items into our POS and how they show up in the kitchen.
Speaker Change: To give you just a couple of practical examples of how we address this, we simplified the process for how we ring in our craft margaritas. This simple change resulted in about a 20% decrease in comped margaritas and mistakes making their way to guests.
Speaker Change: We added take-out and delivery tailored cooking and packaging guidance to our kitchen display systems, driving our accuracy scores up about 10%.
Speaker Change: While both examples benefited margins, their bigger impacts were made by creating better team and guest experiences.
Speaker Change: Our operations and technology teams are partnering and continuing to work on mapping additional simplification opportunities.
Speaker Change: On the facilities and equipment side, we completed two important projects.
Speaker Change: We tagged every critical piece of equipment across our system with a QR code that allows us to track repair history, manage warranty work, and apply predictive analytics to determine the optimal replacement cycle.
Speaker Change: This is ensuring our equipment is in the best possible working order for our team members and also ultimately provides savings and efficiencies in our R&M spend. It's all about setting our teams up for success.
Speaker Change: We also implemented preventative maintenance programs for major kitchen and HVAC equipment. Early feedback from the team indicates this work has improved their experience with less equipment failures and we're saving with less costly and frequent repair orders.
Speaker Change: Taking a proactive approach with our facilities and equipment is paying immediate dividends and we believe there's additional opportunities ahead.
Speaker Change: Lastly, as part of the menu work, we're in the process of taking a comprehensive look at our value strategy and promotional platforms.
Speaker Change: Ultimately, we want to ensure that our guests looking for a great everyday price point have craveable options they can count on.
Speaker Change: and that our guests looking for an accessible splurge or treat have exciting premium BJ's handcrafted options, all of which deliver a great value for the role that they play on our menu.
These near-term initiatives provide a springboard for our longer-term strategy.
Speaker Change: Since our last call, we have also completed extensive brand research to better understand our core consumers' needs, our brand's core equities, and how we can uniquely deliver value to our guests.
Speaker Change: This has allowed us to clarify BJ's brand positioning, which provides focus and clarity to the teams as we move forward.
Speaker Change: There is a cross-functional team that is now diligently working on our plans to position the brand for sustained, profitable growth in the mid- to long-term. Focusing on four strategic priorities, which include the team member experience, the team
Speaker Change: our handcrafted food and beverage, delivering wow hospitality, and keeping our atmosphere fresh.
Speaker Change: First, I'd like to talk a little bit about our team member experience.
Speaker Change: At BJ's, we're working from a relative position of strength here. Our turnover is below pre-pandemic levels and below industry norms, and we see a high correlation between manager tenure and restaurant performance.
Speaker Change: Our managers and team members are the heartbeat of BJs, and our research signals that our hospitality can be a real differentiator for us.
Speaker Change: What we also know from our research and from our team members is that we have an opportunity to provide great hospitality more consistently.
Speaker Change: To enable this, we're focused on two areas in the short to medium term.
Simplification in Training
Speaker Change: On the simplification side, there's two main aspects. One is addressing task saturation. Our teams are in the business and at BJ specifically because they want to deliver great guest experiences.
Speaker Change: We have a team focused on identifying and eliminating or automating tasks that do not add value to our guests or get in the way of our managers and team members operating as efficiently as possible.
Speaker Change: The other part of simplification is simplifying our processes and systems. As I mentioned before, we're working to simplify our POS and kitchen display systems and processes, including how items are rung in and how they show up in the kitchen, and this is already showing promising results.
Speaker Change: Turning to training. Our managers and team members alike have told us we have an opportunity to support them better with training. This is an area we're striking the right balance of technology and shoulder-to-shoulder training is key.
Speaker Change: During and since COVID, training for many has gone almost all digital. Our team members have told us that more shoulder-to-shoulder training is important.
Speaker Change: To address this, we have just rolled out new team member training and new manager training is following suit. The training makes the digital modules more streamlined and gets team members shoulder-to-shoulder quicker.
Speaker Change: The feedback has been very positive. What I'm hearing from our managers is they're seeing that it's helping in hiring and retention in the first 90 days because our new team members get buddied up from the beginning and more quickly feel part of our community and are executing better for our guests.
The second strategic priority is our handcrafted food and beverage.
Speaker Change: The brand work we have done has reinforced that we have some powerful core pillars of our menu with strong brand equity and associations, as well as some emerging opportunities.
Speaker Change: The work we're doing on the menu is centered on making strategic choices about where we will drive meaningful differentiation while also identifying opportunities for simplification.
Speaker Change: Pizza, our world-famous pizooki, and our award-winning craft beverages anchored in our craft beer program are clear areas of strong brand equity and association.
Speaker Change: Our wings, steaks, and slow roasts are emerging areas of potential strength.
Speaker Change: It's also clear from our research and guest feedback we have opportunities to improve consumer satisfaction on some of these core platforms.
Speaker Change: In these platforms, where we choose to compete to win, we want to ensure we have the best offering and we can deliver it consistently great. This is where a great deal of our focus is going in the short term, and I'm pleased with the progress here.
Speaker Change: We also identified an opportunity to optimize our menu offerings. Like many, we have a core group of offerings that drive an outsized portion of our total gross margin.
Speaker Change: One is streamline. Remove items that are not delivering from either a commercial, brand equity, or turf perspective. And this will allow us to achieve our second goal, which is to bring exciting innovation to our guests and keep our core platforms fresh.
Speaker Change: Our third priority is delivering wow hospitality. Hospitality has always been at the heart of BJ's brand and it's a big reason why our loyal guests keep coming back.
Speaker Change: This pillar is about how we put our managers and team members in the best position to deliver wow hospitality to our guests, both on and off premise.
Speaker Change: On premise, the core focus is around ensuring we have the right quality and quantity of staff in the right positions at the right times.
Speaker Change: We believe this, combined with some of the simplification efforts I outlined earlier, will put our teams in a better position to deliver our BJ's WOW experience more consistently.
Speaker Change: And just beyond the horizon for off-premise, the main focus is going to be on delivering a seamless end-to-end experience and removing friction points.
Speaker Change: We have a robust off-premise business, about 17% of our total sales.
Speaker Change: And we believe we have the right product offering to continue to grow in the off-premise.
Speaker Change: We do, however, have a clear opportunity to optimize that end-to-end journey and make things easier for guests and team members alike, all the way from how we merchandise our items and capture that demand to how we ultimately fulfill and convert that demand.
Thank you.
Speaker Change: Lastly, our fourth priority is about keeping our atmosphere fresh. BJ's atmosphere has always been a long-term differentiator for our brand. In 2025, we will continue to focus on keeping our footprint fresh by remodeling up to 30 existing locations to expand our successful remodel program while continuing to optimize based on learning.
Speaker Change: We plan to open one new restaurant in 2025 in Queens Creek, Arizona in just a couple of weeks and we're very excited about this restaurant and believe it will be accretive to our total restaurant portfolio.
Speaker Change: In addition to this, our team has been closely analyzing recent restaurant openings to identify key success factors and maximize our return on investment.
Speaker Change: The preliminary findings are promising, and as such, we will return to building our new restaurant pipeline with more restaurants to come in 2026.
Speaker Change: Our capital expenditures in 2025 related to new restaurant openings depend on how quickly we can develop a more robust and targeted pipeline that aligns with our refined criteria for new locations.
Speaker Change: We're excited about the future unit growth for BJs, and we will keep you updated as we move throughout the year.
Speaker Change: While I'm pleased with the progress today, we are early in this journey. The clarity we've gained from our brand research, our operator feedback, and learnings from recent performance, combined with the organizational alignment behind these strategic priorities, give us confidence in the path ahead.
Speaker Change: Thank you, and now I want to turn it over to Tom to provide more detail on our fourth quarter results and our outlook for 2025.
Thanks, Lyle, and good afternoon, everyone.
Speaker Change: During the year, we generated record sales of 1.36 billion as our sales driving initiatives gained traction throughout the year, culminating with 5.5% comp restaurant sales growth in Q4.
Speaker Change: We produced record restaurant level cash flow of $195.6 million, which increased by 10% from 2023 levels.
Speaker Change: We improved our restaurant margins by 110 basis points to 14.4% for the full year, including 15.4% margins in Q4.
Speaker Change: And we delivered adjusted EBITDA of $117.1 million, which was 13% higher than the prior year.
Thank you.
Speaker Change: Turning to the fourth quarter, we generated sales of $344.3 million, which was 6.4% higher than last year.
Speaker Change: On a comparable restaurant basis, Q4 sales increased by 5.5%, driven primarily by traffic growth.
Speaker Change: This represented our best comp performance since 2018 when excluding the COVID recovery quarters as our sales driving initiatives work to grow sales, traffic, and market share during the quarter.
Speaker Change: In Q4, our comp sales beat the industry by 3.7 percentage points and our traffic beat by 6.8 percentage points as measured by black box.
Speaker Change: Our traffic outperformance was driven in large part by our key promotion, the Pazooki Meal Deal, that we launched in September, as well as an investment in media to build an awareness of this promotion and the BJ's brand overall.
Speaker Change: We also built guest excitement around limited-time offerings, such as our Spooky Pazookie and the 25th anniversary of our Grand Cru Belgian Ale.
Speaker Change: Our restaurant level cash flow margin was 15.4% in Q4, which was 100 basis points better than a year ago.
Speaker Change: We effectively leveraged our strong sales and delivered improving margins while also investing in food and marketing costs.
Speaker Change: Our restaurant level operating profit increased 14% to $52.9 million for Q4, which marks our most profitable Q4 ever.
Speaker Change: Adjusted EBITDA was $33.1 million and 9.6% of sales in the fourth quarter.
Speaker Change: Q4 EBITDA was 5.8 million higher than last year while also marking or making longer-term investments in our brand positioning which Brad and Lyle both highlighted.
Speaker Change: We reported a net loss of $5.3 million and diluted net loss per share of $0.23 on a gap basis for the quarter.
Speaker Change: The net loss included a few extraordinary items, including a $15.4 million charge for loss on disposal and impairment of assets, a $4.6 million charge related to an extension of a warrant, and a $1.5 million charge related to leadership transition costs.
Speaker Change: The loss on disposal and impairment of assets was elevated this quarter as we completed a review of our existing restaurants and potential future sites resulting in a number of impairments and our planned replacement of our pizza pans as we work to upgrade the pizza category of our menu.
Speaker Change: We added supplemental non-GAAP metrics to our earnings release to account for these items.
Speaker Change: Adjusted diluted net income per share grew 5.1% to 47 cents per share compared to 45 cents per share last year.
Speaker Change: For more detail on restaurant expenses, our cost of sales was 25.9% in the quarter, which was 40 basis points higher than a year ago.
Speaker Change: Food cost inflation was approximately 3.5% year-over-year, which we did not fully recapture in menu pricing.
Speaker Change: Also, our pizooki meal deal had modestly higher food costs than our menu average.
Speaker Change: Labor and benefits expenses were 35.8% of sales in the quarter, which was 70 basis points favorable to last year.
Speaker Change: Our restaurant teams hit their stride while still maintaining strong guest sentiment scores as we drove meaningful traffic and sales in the quarter.
Speaker Change: Occupancy and operating expenses were 22.9% in the quarter, which was 70 basis points favorable compared to the fourth quarter of last year.
Speaker Change: We continue to achieve strong efficiency gains over the prior year from our cost savings initiatives and leverage from higher sales.
Speaker Change: We achieved these overall O&O gains while investing 50 basis points in additional marketing, which was effective at driving incremental traffic to our restaurants.
Speaker Change: G&A was $23.7 million in the fourth quarter. Included in G&A was a $2.1 million cost related to the acceleration of our brand positioning work and $1.5 million related to leadership changes.
Speaker Change: Without those costs Q4GNA was approximately 1% lower than our expectations.
Speaker Change: During the quarter, we repurchased and retired approximately 234,000 shares of common stock at a cost of $8 million.
Speaker Change: Reflecting the progress on our plans and our cash flow growth expectations, our Board of Directors approved an increase in the repurchase program at $50 million. We currently have approximately $83 million available under our share repurchase program.
Speaker Change: Turning to the balance sheet, we ended the fourth quarter with net debt of $40.4 million, comprised of a debt balance of $66.5 million, less cash and equivalents of $26.1 million.
Speaker Change: This equates to a $7.7 million reduction in net debt from our balance at the end of Q3.
Next, we provided our 2025 financial outlook today.
Speaker Change: We anticipate full-year comparable restaurant sales in the 2 to 3% range.
Speaker Change: This takes into account multiple third-party forecasts for both food away from home and industry traffic, as well as our own idiosyncratic growth drivers.
Speaker Change: This forecast also accounts for recent sales trends, which have softened somewhat from Q4 2024 levels due to weather in certain markets and more general conservatism in consumer spending coming out of the holidays.
Speaker Change: Specific to Q1, we continue to deliver positive comp sales and traffic and continue to beat the black box index on both of those measures, though the spread has tightened since Q4.
Speaker Change: We expect Q1 comp sales near 2%, which assumes the recent weather headwinds begin to moderate as we move through the remainder of the quarter, which has tended to be the case historically.
Speaker Change: Our full year 2025 guidance assumes comp sales shifting higher in Q2 and Q3, similar to expected Q1 levels without the weather impact, before moderating in Q4 as we lap our strongest comp sales from 2024.
Speaker Change: We expect restaurant-level operating profit in the $205 million to $215 million and adjusted EBITDA of $127 million to $137 million.
Speaker Change: These profitability levels take into account a range of top-line scenarios, as well as our expectations for inflation and the initiative's plan for this year to drive increased profitability while investing to position BJ's brand for future success.
Speaker Change: We expect the regular seasonality in our profitability and additional margin expansion in the second half as additional margin building initiatives are implemented.
Speaker Change: In 2025, we plan to open one new restaurant and remodel up to 30 existing locations.
Speaker Change: By the end of 2025, approximately 60% of BJ's restaurants will either be recent prototypes or have been refreshed within the past four years as part of our ongoing remodel initiative.
Speaker Change: Our capital expenditures in 2025 related to future restaurant openings will depend on the speed at which we can develop a more robust and targeted pipeline that aligns with our refined criteria for new locations as Lyle outlined.
Speaker Change: Our increased repurchase program will provide ample capacity to execute on our repurchase plans this year.
Speaker Change: In closing, we are proud of our fourth quarter results and the strong foundation we are building for sustainable, profitable growth. We have a clear path to sales and profit growth ahead, and our long-term strategy and the strong consumer appeal of the BJ's brand position us well to continue building on our successes.
Speaker Change: With strong and improving cash flow, expanding margins, and a healthy balance sheet, we are well positioned to execute multiple initiatives aimed at enhancing shareholder value.
Speaker Change: Thank you for your time today, and we'll now open the call to your questions. Operator?
We will now begin the question and answer session.
To withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Thank you for joining us. Have a great day.
Speaker Change: The first question comes from Alex Slagle with Jeffries. Please go ahead.
Thanks, congrats.
Alex Slagle: Great to see the progress through the quarter. A couple things I just want to clarify first. On the restaurant level profit guidance and the implication for restaurant level margin, I guess if we assume revenues are
Alex Slagle: up a little bit, maybe low single, near mid-single digits, I guess, towards the lower end, really, just given the unit growth. I mean, restaurant-level margins, should we assume them sort of flat to up 50-60 basis points, or how should we kind of clarify the margin implications?
Speaker Change: Sure, Alex, and thanks for the question. As we look at the year ahead, we see a path to expand margins. So, in the range we gave on the upper end, it certainly is, you know, it does imply margin expansion. Even on the lower end, a little bit of that expansion, and it really is across the...
Speaker Change: the categories of margin. We see opportunities in food cost, in labor, and O&O. There is some reinvestment that's happening that helps us build traffic and continue to beat the industry, but net-net, we do see a path for margin expansion in our planning for it.
Speaker Change: Okay, and the pricing expectations, you mentioned that if the pricing lagged a little bit, the inflation, but if you could...
Speaker Change: Talk to what you're thinking on pricing and if you think that'll be enough to offset the inflation.
We look at just generally around comp right now.
Speaker Change: It's mostly driven by traffic and getting into the components of check there is
Speaker Change: In terms of inflation, we like what that's showing in terms of our value scores, our different scores as we measure the guest and how that's driving traffic. But also, you know, just looking at mixed shift, we are seeing some mixed shift into things like the Zucchi Meal Deal. There is some
Speaker Change: in our off-premise channel still. There will be some pricing in there.
Speaker Change: We'll price to offset inflation, but that's not a driver of where the margin improvement's coming from. We're expecting our initiatives to be the driver there.
Speaker Change: Hey, Alex, Brad here, and I would just jump in as well that, you know, we have a lot of arrows in our quiver now around margins, and so you're going to find us remaining pretty agile there.
Speaker Change: We really want to build the total absolute dollars of profitability is what we're after and so we've had some success already with that Continue to explore that
Speaker Change: And so, yes, the margin percents are important, but we're more guided by the absolute dollars that we can drive, particularly when you look at our unit economics, you know, very large box, high AUVs.
all the way down to P&L.
Speaker Change: May not see it as much on food costs, given just where the cost structures are these days.
Speaker Change: But I think the real message to take away is there's a lot we can do, we're going to remain agile, we've learned a lot, we're still learning a lot more, but
Speaker Change: You know, we're putting the guidance out for the year that we feel comfortable that we should be in that range, and as it develops for the year, we'll update that.
But don't foresee right now any major changes to that.
Okay, thanks. Thanks for that.
Speaker Change: Excuse me, the next question is from Todd Brooks with the Benchmark Company. Please go ahead.
Todd Brooks: Good evening, guys, and congrats on just a really stellar fourth quarter.
Todd Brooks: A couple questions, if I may. One, with the success that you talked about with some incremental marketing spend in the fourth quarter, how are you thinking about
Todd Brooks: Using marketing as a lever to drive traffic going into fiscal 25 and any thoughts on kind of a
Todd Brooks: a percentage claim on sales for marketing spend, or is it more different in new tactics? If you could just kind of dig into that a little bit, that'd be great.
Todd Brooks: First of all, I mean, we're still learning, right? We had a, obviously a great Q4. And I think, as I've mentioned before, we saw outperformance in our media markets, and we saw
even more outperformance in our non-California media markets
Todd Brooks: So, you know, those things suggest there's headroom there, and we're going to take those learnings to shape what we're doing going forward.
Todd Brooks: I would say at this point, though, strategically, we're not planning major shifts in our spend strategy. It's going to remain...
Todd Brooks: very targeted, looking at accelerating performance in California and some of our other kind of core markets where we have some lagging awareness.
and consideration.
Todd Brooks: We're not going to suddenly kind of be going out there and trying to compete for share of voice with some of the big national media spenders.
Todd Brooks: We're going to need to continue to be efficient and choiceful about this spend. And I think given the share gains that we saw in Q4 and the outperformance in those media markets,
I'm encouraged that we can be kind of...
choiceful about where we do things.
Todd Brooks: I want you to get some more time under our belt.
Todd Brooks: We can decide if we want to make any sort of, you know, material changes or acceleration there, you know, from a channel point of view.
Todd Brooks: This is helpful, right? We are not a big linear TV spender. We are looking for more efficient ways to get in and spend our money and talk to our target. And so, you know, our broadcast is more connected TV versus linear and heavily in digital and social.
Okay, great. That's helpful. Thanks. And then.
You highlighted kind of...
Core Brand Pillars.
Todd Brooks: that BJS has been able to lever for a long time and then some emerging
Todd Brooks: categories that you hope could expand into those brand pillars. If you think about what worked value-wise in in Q4 especially around Pizzucchi meal deal
Todd Brooks: Are you delivering enough value based on the results? And I would argue that the results probably say yes we are, at least at that point in time in Q4.
Todd Brooks: And thoughts on how do you deliver value across Fiscal 25?
Speaker Change: take what's what's worked in Q4 and continue it in some sort of perpetuity here or there are other levers that you could pull confidently that you feel could be as impactful as Pizzucchi Mule Deal was.
Speaker Change: Yeah, thank you for the question. I think it's probably a bit of a multifaceted answer. On your first part, like, is there more headroom with the Pazuki meal deal? We like what we're seeing in the Pazuki meal deal. We like the traffic that it's motivating. We're actually seeing, as people come in during the week, we've seen kind of a halo benefit in non-Pazuki meal deal categories.
Speaker Change: with some unit growth in other areas, so people coming in.
Speaker Change: somebody at the table getting a Pazuki meal deal, somebody at the table not getting a Pazuki meal deal. So, you know, we like that. We like what we've seen in terms of...
Speaker Change: You know, the marketing is overhanging to the weekend so that when the deal is not on and we have awareness, we can drive it.
Speaker Change: So we think there's more with Pazuki Meal Deal. I think we also want to take this opportunity.
Speaker Change: You know, as I mentioned in my remarks, to take a comprehensive look at our value strategy and promotional platforms.
Speaker Change: so that, you know, we can really lean into the things that are working and then, you know, retire some of the things that may not be.
Speaker Change: And what we need to do is continue to have things like the Pazuki Meal Deal for those guests that are looking for that kind of everyday value that may be more driven by price.
and make sure that our premium kind of handcrafted trade-ups.
Speaker Change: are delivering the way they should deliver. So that, you know, we have both ends of that guest being satisfied with value as they see it. So value to me is kind of the holistic occasion and is applied differently to different guests, if that makes sense, or different cohorts.
Speaker Change: Yeah, that's great. Thanks, Lyle. And one more, and I'll jump back in queue. Tom, if you think about the commentary of expecting to get to 2% same-store sales in the first quarter, is there a way to quantify what's been lost to weather and potentially the fires in the California market as far as either
lost service days year over year, or maybe alternatively.
Speaker Change: I know that you often talk about how strong those tentpole holidays are, which I believe Valentine's Day is one of them for the brand.
Speaker Change: Just either or both that where we can get at okay, the strength of the consumer would not disrupted by these Exogenous factors and help us understand. Okay 2% without these headwinds
Speaker Change: is really running closer to mid-single-digit than to low-single-digits. Thank you.
Thanks for the question, Todd.
Speaker Change: The way that I look at it, or we look at it, looking at January and the comp, really when weather was a cleaner lap,
Speaker Change: You know, that was closer to, call it, higher end of our full year guide.
Speaker Change: Since coming into February, we've seen a lot more weather impacts that really did weigh on results. So, you know, there is, you know, we talked about this in the guidance, an assumption that that moderates as we go through the...
Speaker Change: through the quarter as we finish the quarter up here. But yeah, there has been, you know, it's certainly, you know, for the full quarter, it's worth probably over 100 basis points and from the weather we've seen so far.
Speaker Change: area, other than what Brad mentioned of some really nice work by our teams and supporting the communities. But as comp goes, that won't have much of an impact on the quarter. It really is getting through the weather piece here and coming out of that is where we see, you know, hitting back to more of the true run rate.
Thank you.
Speaker Change: Thank you. The next question is from Brian Mullen with Piper Sandler. Please go ahead.
Brian Mullen: Hey, thank you. Just a question on your simplification efforts. On the menu side,
Brian Mullen: In the prepared remarks, one of the things you talked about was streamlining. So I'm guessing you see an opportunity to shrink the size of the menu. So do we have that right? And if so, you know, any sense of the scope or the magnitude of what you might be able to do and then how much time.
Brian Mullen: you would need before you would want to move forward or something like that.
Lyle Tick: Yeah, sure. This is Lyle again, by the way. So, you know, as we look at the menu and you think about simplification, the
Yeah, this is not new in terms of BJ's, but...
Lyle Tick: Those are the kind of targeted opportunities that you have to look at how do you streamline those items that aren't.
Lyle Tick: either specifically unique to you from a brand equity point of view, may not be delivering from a commercial perspective, or might be stepping on another item from a turf perspective.
Lyle Tick: I don't have right now a targeted number of items that we are looking to remove, but I absolutely do see the opportunity to ultimately streamline our menu, and I think it's a balance in terms of giving you some color on how we think about it.
You know.
Lyle Tick: With the menu the way it is now, we don't have a lot of room to, you know, bring new news and innovation and even keep news on our core platforms to keep them fresh. So, as we are able to go into the menu and streamline some of those items that are in the long tail,
Lyle Tick: an opportunity to then bring new news on our core platforms
Lyle Tick: ultimately having a menu that's easier to execute for our team members.
Lyle Tick: So I don't have a targeted number as yet as we go through that work and that becomes more clear.
Lyle Tick: happy to share that in the future. In terms of when that process will start,
Lyle Tick: You know, you're probably looking more towards the second half of this year, as we look at some of our menu, planned menu reprints, as our first opportunity to look at at taking some things down, as well as while we do that, providing some new news to guests.
Speaker Change: Okay, thank you for that. And then just to follow up, you know, we'd be curious to get your...
Speaker Change: assessment of the service levels in the stores right now, you know, assuming you are able to find efficiencies elsewhere, do you envision being able to put more labor hours in the front of the house? Or maybe that's not even necessary. Just would be great to get your thoughts on the state of that at BJ's right now.
Speaker Change: Yeah, I mean I would say this what we hear from our research and the brand work that we've done is
Speaker Change: you know, in the places where we're doing it well. It is a real differentiator and strength for the brand, but that...
Speaker Change: We are not delivering that as consistently as we need to.
Speaker Change: across the board for every occasion. And that's where some of the things that I talked about.
Speaker Change: in terms of looking at how do we look at process simplification and how do we look at task saturation and making things easier for our team members.
Speaker Change: is a big focus for us right now because we need to make it easier for them to deliver that great experience more consistently.
Speaker Change: I think I mentioned training. I'm a big believer that, you know, our business is delivered through people and we need the right training and our team members.
Speaker Change: We're pretty loud and clear about needing it updated to the training and that shoulder-to-shoulder training. And then to specifically address your question,
on labor as we as we look forward.
You know, on balance, we are seeing kind of...
Speaker Change: in opportunity to get, as I was talking about, the right people in the right place at the right time. So when we look at what the data is telling us...
Speaker Change: It's telling us that on the shoulder hours, what I mean by that is like the hours like leading into a dinner and the hours leading out of the dinner, we actually maybe are a little loose and have an opportunity to get tighter.
Speaker Change: But within those kind of core peak periods, we may need some more labor in the right places.
and The Right Places.
Speaker Change: is really unique by restaurant. And that's the benefit of some of the data that we're looking at right now, where some restaurants might need a little more heart of house labor for a peak time, and some restaurants might need a little more front of house labor. And we can now kind of have the data support us and support our GMs in getting the right people in the right place.
Speaker Change: at the right time, but on balance, the data isn't saying there's a net huge investment in labor. It's about getting, moving the right amount of labor to the right times, is more what it's suggesting to us.
Yeah, this is Brad here.
Speaker Change: I just want to emphasize what Lyle was saying, and first I'd say, even though I'm sitting in a different seat, you can't take the finance guy out.
Speaker Change: You know, to me, it really is about optimizing our hourly labor staff, and, you know, these are big boxes. They can do big volumes.
Speaker Change: and yet be careful about just cutting the cost. So there's a lot more tools today, a lot more learning of how to really optimize the labor, put it in the right places at the right times, and it makes a big difference.
Speaker Change: We're seeing it that we have to serve more in the fourth quarter. We're seeing it in consumer scores, which should bode well for future expectations as well. So, you know, you look at the fourth quarter, and overall, we added hourly labor.
Speaker Change: But, we think we got a good return and we leveraged the whole P&L, and so we'll consciously be looking at those opportunities, and, you know, we're learning as we go, but we think it's more of a position of strength to be working for than trying to cost-cut our way
Thank you very much. Thank you. Thank you.
Thank you both.
Speaker Change: The next question is from Jeff Bernstein with Barclays. Please go ahead.
Speaker Change: And Mr. Bernstein dropped off the line when he tried to unmute his phone, so we'll move on to Sharon Zachfia with William Blair. Please go ahead.
Sharon Zachfia: Hi, I've had that happen to me before, so I'm glad it wasn't me. So I guess, you know, the question on brand positioning, you know, I've followed the company long enough.
Sharon Zachfia: to remember kind of when pizza and beer were the driving forces behind, you know, when people went to BJ's, that was the first thing you thought of. And I'm just curious, it's been a long time since I've heard anybody kind of update kind of where pizza and beer are as a percent of the mix, you know, either in California versus historical or in newer markets.
Sharon Zachfia: and kind of where you think those ex-California markets are in terms of thinking pizza and beer when they think of BJ's.
Lyle Tick: Yes, so let me, this is Lyle by the way, I will talk to the last part of that question and then Tom may come back around with some of the specifics.
Lyle Tick: and their power. And pizza and our craft beer, which is actually evolved into a bit of a craft beverage program. You may or may not know about our sodas and our emerging cocktail program. But
Lyle Tick: You know, those are definitely core equities for us. The Pazuki is a core equity for us. And I think you have to build from positions of strength.
Lyle Tick: When you think about the associations of that by geography, in California, pizza is our biggest association and our biggest traffic driver.
Lyle Tick: When you look outside of California, pizza is still a strong association with the brand. It's not as big of an association or a traffic driver outside of California.
Tom Houdek: One of the things I think you heard Tom mention was about the pizza pans.
Lyle Tick: One of the other things we learned was, while it is a big association and equity for our brand, we do have an opportunity to improve consumer satisfaction and guest satisfaction on that product.
Lyle Tick: So, when I talk about focusing in on the core, one of the big projects we are well on our way on is kind of a renovation of our pizza platform, because we know we have an opportunity to wow our guests more with our pizza the way I think we did.
Lyle Tick: back in the beginning, but it is a big part of our mix. It obviously became less of our mix over time as we introduced slow roast and steak, but still an important driver. The other thing we've learned is it's an important driver of a unique occasion.
Lyle Tick: So, you know, it brings, it's a great driver of group traffic occasions, brings a number of people together, and we find those checks attach a lot to them.
Lyle Tick: So they're actually really good checks from a check size and margin point of view. So we think pizza is an area of strength that can be rekindled as we go forward with BJ's in the next chapter, actually.
Speaker Change: Thanks for that. And then there was a comment about a cautious consumer kind of in the commentary for the first quarter. I just didn't know if that was kind of a comment that was kind of thrown in because who knows what's going on with the consumer or if you're actually seeing
Speaker Change: kind of shifting around on the menu or more of a value-conscious kind of decision-making manifesting so far in your business in 2025.
Speaker Change: Yeah, I mean, so far this year what we're seeing is from a consumer perspective...
Speaker Change: where, thankfully, we over-indexed versus the category. Maybe some softness in the kind of below-50k household guess, but...
You know, I'd see it on balance.
Speaker Change: Like, we haven't seen a major, like a seismic shift in consumer behavior over the first quarter. And as Tom was mentioning, you know, January was a strong month for us that delivered, you know, and I'd say the top end of our guidance.
Speaker Change: even with the New Year's calendar shift, and it was really February where we've seen more of a weather impact. So, it'd be hard for us to point to consumer with the data we have as being the driver there right now.
Thank you.
Speaker Change: The next question is from Brian Bittner with Oppenheimer and Company. Please go ahead.
Speaker Change: Hi, thanks guys. This is Mike Tamason for Bryan. So, obviously, congratulations on the strong results.
for making such a quick progress against your priorities here.
Speaker Change: Uh, you know, as it relates to the, uh, just getting to the, from the restaurant level profit to your adjusted EBITDA guidance 25, are you assuming that G&A kind of holds flat or is sort of down slightly? Can you just talk about that maybe? Thanks.
Speaker Change: If you think of 2024 in our G&A, there were some one-time items in there. We highlighted some that were Q4 specific around some extra consulting spend for brand positioning work, some leadership transition costs. So yeah, year over year, we're expecting G&A down some modest amount.
Alex Slagle: Okay, thanks. And then, Tom, I just want to clarify on the 2Q and 3Q commentary that you indicated Tom should look like 1Q without that weather headwind. So, you know, if you're at 2% in 1Q, like you talked about, you add back that 100 basis point headwind from weather that you also talked about, you know, that would be like 3% for those quarters. Is that the right way to interpret that? I just want to make sure we're all on the same page.
Alex Slagle: the higher end of the full year guide for Q2 and Q3 would be the way to think about it.
Perfect. Thanks so much.
Thank you.
Speaker Change: The next question is from Jeff Bernstein with Barclays. Please go ahead.
Speaker Change: Hi, thanks. This is Pradeep Khan for Jeff. Appreciate you guys squeezing us in here as I got disconnected. Just had a question on the real estate pipeline, maybe a bigger picture question. You're clearly ramping up to open new units.
Speaker Change: in the near future. And in your prepared remarks, you spoke of updated criteria for.
opening these new units. Perhaps maybe you can just share.
Speaker Change: some of the main differences between the old criteria and the new criteria, and just what maybe you could see down the line in 26 and beyond in terms of openings. Would you be focused on
Speaker Change: infilling your existing markets or you're pushing into new markets or some combination, any color you can provide there. I know it's a bit early, but anything would be appreciated. Thanks. And I have a follow-up.
Lyle Tick: Yeah, no problem. This is Lyle. You know, we have done, you know, studying and refined a number of site-specific criteria as we look at our unit pipeline and refilling our unit pipeline.
Lyle Tick: And you kind of nailed it in your question. The two biggest factors that we're going to focus on in the near term are brand awareness, so markets where we have existing and are growing brand awareness.
Lyle Tick: and Human Capital, which is kind of dovetails with the above.
Lyle Tick: Those are, you know, markets where we have the management and team member bench strength. I mean, those two things.
really shine through in
Lyle Tick: when we kind of evaluate our restaurants and the ones that we can get big hits very quickly on. So we will be focusing.
versus Greenfield or new markets in the short term.
Lyle Tick: And I think, you know, if you look at last year and the opening in Tracy, California, and our opening in Cypress, Texas, that underlines kind of that as a winning strategy, and we're confident Queens Creek, Arizona is going to kind of reinforce that as well.
Lyle Tick: As we kind of open the aperture on it, I think over the medium to longer term, we will turn our attention to new markets and we're confident in the brand's resonance and have seen that. But what you see with the new openings in the new markets is it's a longer ramp up to get to kind of full performance.
Lyle Tick: And we think there's ample opportunity as we look at infilling, and in fact, in some of the markets, we think that can help accelerate some of the awareness and consideration gap that we have in the market outside of California.
If that makes sense to you.
Lyle Tick: It makes perfect sense. I appreciate that color. And just maybe one more for Brad. You've been in the seat now for about six months. Just anything high-level that you've seen that maybe surprised you versus your initial expectation?
Lyle Tick: Can you call anything out in terms of just big opportunities for future value creation? Thanks.
Lyle Tick: Yeah, actually a rush of ideas come to mind. If I start back to the beginning, the brand and the business model are probably much healthier than I initially had thought that it would be, which gives us a much stronger platform to work off of.
Lyle Tick: And I think a lot of folks forget, you know, just how big our boxes are and where our unit volumes can go to, and there's tremendous leveraging that's available there. And so what you see we're plotting out today, and Lyle and his leadership team have really
Lyle Tick: got heads down and trying to say where are those bigger opportunities for us and how do we go about
Lyle Tick: and I'm pursuing the, well, I say first I make, where can we play in those? Which ones are the right ones for us to go to? And then how do we go and get those? So.
Speaker Change: Yeah, I think there's a lot of potential for this brand. I joke internally saying it's the old book of good to great. We've been a good brand and a solid business model, but there's no reason we can't be a great brand with a superior business model.
Speaker Change: And so I'm pretty optimistic about that. I think you heard Lyle lay out kind of what's on the near-term horizon, obviously working on things beyond that.
Speaker Change: Some will fall off, new ones, opportunities will creep on there, but with where the brand is positioned today, there's a lot of places to look.
That's much appreciated and congrats guys on a strong result.
Thank you.
Speaker Change: This concludes our question and answer session and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.
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