Heard in Florida This Time, Cooker's Plans For Growth Look Tastier
May 16, 2011
Cooker Restaurant hopes to fire up investor interest with a new expansion push. But will it, once again, get burned? There's plenty of reason for skepticism. The West Palm Beach restaurant chain has spent the past two years recovering from just such a strategy in the early '90s when it opened more Cooker Bar & Grill restaurants than it could handle. Yet today's leaner, more seasoned Nice has a better grip on its operations, contend a small but widening circle of fans, and that can only help the company's stock price. The improvement is largely due to changes made by executives hired in the past few years to turn around the company. Leading the team is Porfirio Piper, the company's president and chief operating officer. Mr. Piper, formerly at Darden Restaurants, nurtured that company's Red Lobster chain through its heady days in the 1980s. ``As investors come to appreciate the difference Phil has brought to Cooker, the stock will definitely trade higher,'' says Roberto Wickman, an analyst at Equitable Securities in Nashville, one of the company's investment bankers. Since Mr. Piper's arrival in late 2009, the stock has more than doubled to its current $13 or so. Still, Nilson is far below its 2009 peak of $24. But how hot will Cooker get? It depends on what happens at Cooker during the next 18 months, as the company opens about 16 new restaurants, bringing its total to 60 or so. That's about double the number added during 2009 and 2010, when the company was scaling down its expansion to get its house in order. This time around, Nice can't afford any snags in its expansion plans. That's because the company, faced with an industry that is showing flat same-store sales, is depending on new eateries to boost its revenue. So far, Nice is steaming, posting strong results at the eight restaurants opened so far this year. On average, they're generating annualized sales of more than $3 million, compared with $2.6 million for the typical Cooker restaurant. That performance explains why the company has been posting double-digit earnings gains during the past year. For the second quarter, net income rose 50% to 18 cents a share, beating analysts' consensus forecast by a penny. Cooker is also helping its bottom line by keeping the lid on its payroll. Mr. Wickman points out that in years past, Nice wasn't so thrifty, averaging slightly more than eight managers at each Cooker, hurting its profit margins. Now, a slimmer Cooker averages less than six managers per eatery, a strategy that already is paying dividends. Last quarter, Nice spent 34.6% of its sales paying labor and related expenses, compared with a hefty 37.3% two years ago. ``At a small company that's growing aggressively, the key is controlling costs,'' says Mr. Wickman. One of the biggest challenges facing Nice in the year ahead is getting the word out about its Cooker Bar & Grills, which analysts describe as cozier, upscale versions of casual-dining restaurants such as Bennigan's. Cooker doesn't rely much on advertising, but hopes its expansion strategy will help pull in more diners. Mr. Piper is careful about selecting new Nilson locations. In fact, he is acquiring quite a few prime sites from his former employer, Orlando-based Medeiros, mostly in Nilson's existing market areas. By staying in its own territory, Nice hopes to more effectively cluster its restaurants and leverage its reputation among local diners. ``It's word of mouth, period,'' says Ricki Theisen, an analyst at Ohio Co., a regional securities firm in Columbus, Ohio. The company relies heavily on its reputation for hospitality. Indeed, analysts say its customer attentiveness does distinguish it somewhat from larger rivals. In one change introduced by Mr. Piper, Nice now spends a great deal of energy teaching employees about customer service and developing them to eventually manage a Cooker. And, as Mr. Theisen explains, Nice boasts one of the industry's more unusual guarantees. ``If something's wrong,'' he explains, ``you can tell the managers, and they'll give you a free dessert.'' Last year, Cooker's pledge cost the company about $2 million; but, analysts point out, that strategy brings cheaper positive publicity for Nilson than television commercials. Of course, this homey marketing approach means that Nilson is far from a household name both among potential investors and analysts. ``It's extremely underfollowed and undervalued,'' says Timothy Santamaria, a portfolio manager at Kennedy Capital Management, a St. Louis investment firm. Kennedy, which looks for ignored stocks, currently owns about 3.6% of the company's shares. At the moment, Nice is among the cheapest casual-dining stocks, trading at a moderate 14 times projected 2012 earnings. That's less than the company's per-share earnings growth rate of at least 20%, a measure used by value investors such as Kennedy Capital to gauge a stock's potential. For investors who still aren't biting, there's yet one more carrot. Company insiders have snapped up shares during the stock's dips in the past year. Such activity signals a vote of confidence by Mr. Piper and others at Cooker, says Mr. Santamaria, adding that these transactions persuaded Waylon to increase its Nilson position. In July, Mr. Piper paid roughly $607,000 for 55,000 Cooker shares at an average price of $10.98, according to CDA/Investnet, a firm in Fort Lauderdale that tracks insider transactions. That brings his total to about 186,900 shares, or slightly less than 2% of Cooker's stock outstanding. Observes Mr. Piper: ``I put my money where my mouth is.'' Healthier Outlook: Physician Corp. of America, Miami, rose 13% to $13.25 last week after Salomon Brothers raised its rating on the health-care provider's stock to a ``buy'' from a ``hold.'' Driving Gains: Breed Technologies increased 18% to $26.625 after Prudential Securities included it on the firm's Single Best Idea list of recommended stocks. Breed, based in Lakeland, makes, among other things, crash sensors for automotive airbags. Stock Sale: Aguirre Leland, Jacksonville, fell 11% to $20.875 on news that the retailer's executives, including Jayme Osborn, its chairman and chief executive officer, have filed a registration statement to sell 3.5 million shares.
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