Friday, November 30, 2012

Chop! Chop! Benihana Cut 33%

Shares of storied eatery Benihana (BNHNA) are being sliced and diced this morning, falling almost a third to $3.50 after the company last night reported a 1% drop in sales for its fiscal Q2, and swung to a loss from a year-earlier profit where analysts were expecting 4 cents in EPS. Profit was weighed down by costs to retrofit Benihana restaurants with a new menu of dishes. The restaurant withdrew its forecast for the remainder of the year, citing economic uncertainty.

In a note to clients this morning, CL King analyst Michael Gallo notes the loss of 7 cents would have actually been a 12-cent loss if not for a tax benefit. The results put Benihana out of compliance with loan covenants, reducing its borrowing power to $40.5 million from $60 million, writes Gallo, with further reductions to come over the next year. Benihana has net debt of $27 million. Gallo reduced his earnings estimate to 1 penny for this year from 28 cents, writing that it “looks like a tough road ahead for Benihana given the high price point for the concet and the potential challenges ahead.” Gallo has a “Neutral” rating on the shares and a

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