Rubio's Profit Slips

Rubio's reported net income of $828,000 for the quarter, compared with nearly $1.3 million in the third quarter last year, and earnings of 9 cents per diluted share versus 14 cents last year. Sales rose to $36.5 million from $36.2 million for the third quarter of 2004 and comparable store sales edged up 0.3% versus a comparable store sales increase of 4.1% for the same quarter last year.

Rubio's operates, licenses, or franchises more than 150 restaurants, and it has said that it plans to expand the number of stores by 10% to 15% per year from 2006 through 2008. One of the questions from financial analysts during Rubio's earnings conference call on Tuesday was whether the company could meet that growth goal with no new franchisees signed up recently.

"We feel very confident that the 10% to 15% unit growth target is achievable in 2006, and that, based on what we have seen coming into the pipeline, that we can make that target on a company-owned basis," Sheri Miksa, Rubio's president and CEO, said in the conference call. At the same time, the company will continue to review prospective franchisees to aid in the expansion, Miksa said. This year, Rubio's has opened three new locations so far and plans to open three more in the first quarter.

The company attributed its earnings slide to increases in occupancy costs and other expenses, mainly higher utilities, common area maintenance charges and property taxes that accounted for approximately $400,000 of the increase. Other general and administrative expenses increased primarily due to $400,000 in legal fees related to lawsuits.

Even though the company's comp-store sales edged up slightly, "We were not pleased with our third quarter top-line revenue," Miksa said. The company is focusing on improving its marketing effectiveness and in making over its restaurants with a new image as part of its effort to boost profitability, she said.