McCormick & Schmick's Plans '08 Expansion

The company, which operates 73 restaurants, has leases signed for 60% of the restaurants planned for 2008. Its plans for the remainder of 2007 include finishing the year with 11 new McCormick & Schmick's Seafood Restaurants and one Boathouse. It opened one new restaurant in Santa Ana, CA during the second quarter and plans to open five in the third quarter. The new locations in the third quarter will be in the Chicago suburbs of Schaumburg and Oak Brook, IL, as well as in Dayton, Cleveland and Austin.

Doug Schmick, chairman and CEO, pointed out during the conference call that the second quarter results marked the 16th consecutive quarter of comparable restaurant sales growth. He credited "a more favorable mix of premium seafood offerings" and other factors, including daily printed menus that "enabled us to drive performance in a difficult cost environment."

"Over the last six quarters, I think it's fair to characterize the commodities environment as tough," he said. Seafood prices, in particular, have gone up about 5% to 7%, Schmick said. "We were hoping for a little relief in the second quarter, but it did not materialize."

Despite commodity price increases, the company was able to realize cost improvements on a year-over-year basis, according to Schmick. As the company continues to grow, it is benefiting from better purchasing leverage, which helps to mitigate the rising costs, he said.

Compared with the 13-week quarter from last year, this year's 13-week second quarter produced a 16.8% increase in revenues to $89.6 million and a gain in net income of 27.6% to $4.5 million, an increase to 31 cents per share versus 24 cents last year.

The company attributed the growth in revenues to a 2.3% increase in comparable restaurant sales and additional revenues from the 16 restaurants not in the comparable base, including five Boathouse restaurants that it acquired in March. The 2.3% increase in comparable restaurant sales resulted primarily from higher menu pricing.