Troubles at Pie Five lead to negative fiscal 2016 for Rave Restaurant Group
Rave Restaurant Group today reported financial results for its fourth quarter and fiscal year, ending June 26. A news release about the results explains that the company's net loss of $2.3 million in the fourth quarter was $1.7 million greater than the comparable period in the prior fiscal year, primarily due to impairment expenses and lower income from company-owned restaurants.
A net loss of $8.9 million for fiscal 2016 was $7 million greater than the previous year largely due to $1.7 million of impairment charges, as well as a $4.9 million valuation allowance against deferred tax assets, and reduced income from company-owned restaurants. As a result of these factors, adjusted EBITDA for the year fell by $0.9 million to negative $0.3 million.
"Sales trends in the fourth quarter were very challenging for the Pie Five system, as was the case in much of the fast casual segment," Rave Restaurant Group's interim CEO Clinton Coleman said in a statement. "Comparable store sales in our Dallas-Fort Worth market declined, following two years of strongly positive trends, and the newer restaurants that recently entered the comparable store base also experienced a decline in sales compared to their initial year.
“While we have been disappointed by the sales volume sustained after the initial opening months by our recently opened company-owned Pie Five restaurants outside of the DFW market, we continue to be pleased with the growth of the Pie Five franchise system and the average initial sales achieved by the new franchised restaurants.
"We recently added several experienced leaders to the Rave management team and we are fully engaged in addressing these trends at Pie Five. Specifically, we are focusing on initiatives to consistently drive and sustain a higher level of store traffic. We also improved the management of the company-owned restaurants outside of the DFW market so that those restaurants can recapture sales volume experienced during their initial opening months. Meanwhile, I am pleased with the recent stability of the Pizza Inn system and its renewed growth potential."
In late July, Rave Restaurant Group announced that its CEO at that time, Randy Gier, had stepped down. Coleman was appointed interim CEO at that time.
Additional fourth quarter highlights include:
- Total consolidated revenue up 13.3 percent to $15.7 million in the fourth quarter, compared to $13.9 million in the previous year's fourth quarter.
- Pie Five comparable store retail sales dropped 12 percent from last year, but Pie Five system-wide total retail sales grew 59.2 percent, while average weekly sales dropped 14.5 percent from last year.
- Pizza Inn domestic comparable store retail sales grew 0.3 percent, while domestic retail sales dropped 5.1 percent over the prior year.
Additional fiscal 2016 highlights include:
- Total consolidated revenue grew 26.2 percent to $60.8 million over previous year.
- Pie Five comparable store retail sales dropped 5.1 percent, while the brand’s system-wide retail sales grew 110 percent and average weekly sales dropped 10 percent, year over year.
- Pizza Inn domestic comparable store retail sales dropped 1 percent, while total domestic retail sales decreased by 4.6 percent.
- Net addition of 34 Pie Five restaurants to total of 88 at year’s end, with 10 new development agreements to build up to 171 restaurants in 12 states.
Additionally, Pie Five said this week that it’s opening two locations next week in Little Rock, Arkansas and Chicago suburb, Rolling Meadows.