Sizzler Parent Getting Help From International Division By SHELLY GARCIA Senior Reporter Strong performance internationally helped Worldwide Restaurant Concepts Inc. to overcome a few hiccups in its domestic operations during the most recent quarter. Growing pains at Pat & Oscar’s, the company’s newest division, caused a decline in same store sales for the period. But with efforts to reposition the company’s Sizzler chain in the U.S. beginning to pay off, and strong performance in its Australian operations along with a favorable exchange rate, Worldwide’s overall performance remained largely unaffected. Worldwide’s stock price has enjoyed a steady climb as a result, but the company suffered a setback late last week when an E. Coli outbreak at some of its Pat & Oscar’s units sent its share price falling more than 15 percent. At presstime, the outbreak appeared linked to a supplier, not the restaurant, and Worldwide shares began to recover, but analysts expect some volatility until an ongoing investigation is completed. “The worst thing you can have is uncertainty,” said Robert Reid, equity analyst with Briefing.com. “It’s one thing to plug in sales numbers, but when it’s something you can’t quantify, they shoot first and ask questions later.” Sherman Oaks-based Worldwide, operates or franchises 318 Sizzler restaurants worldwide, along with 111 KFC restaurants mostly in Australia, and 21 Pat & Oscar’s units in Southern California. For its first fiscal quarter of 2004 ended July 20, Worldwide reported earnings of $3.6 million or $0.12 per diluted share on $77.8 million in revenues. That compares with net income of $3.3 million or $0.12 per diluted share on revenues of $67.7 million for the comparable period last year. Since the company, formerly called Sizzler, emerged from a Chapter 11 reorganization, a new management team has been hard at work to revitalize the business. Pat & Oscar’s, a casual family restaurant that offers pizza, chicken and ribs and other fare for eat-in and take-out dining, has been the centerpiece of that effort. In San Diego, where nearly half of the units are located, Pat & Oscar’s has grown to account for $33 million in sales, up from about $12 million when the chain was acquired. But the new stores cannibalized sales at some of the existing units, and revenues in the period declined by 3.4 percent on a same-store basis. “We have seen a little bit of deterioration on the existing stores when we built the new units,” said Keith Wall, vice president and CFO. “We kind of expected that, but we felt it was appropriate to expand that market to the point where we now have the ability to do television advertising.” Worldwide is about to roll out a television advertising campaign that Wall said should turn the sales momentum around and at least six new Pat & Oscar’s units will roll out in 2004. Ultimately, Worldwide expects Pat & Oscar’s to account for the largest portion of its domestic sales. But in the meantime, Sizzler remains Worldwide’s largest division, and that restaurant group is still a work in progress. Same store sales for Sizzler declined by 1.5 percent in the U.S. in the most recent quarter. “They upgraded their steaks, which was a good move, but I think it’s just a straight competition thing,” said Leon Gottleib, president of USA International Restaurant Hotel & Franchise Consultants in Tarzana. “They haven’t done enough to attract me or my family, and I think they need to address that.” A new look Worldwide is test marketing a new store design for Sizzler with lighter colors and an open kitchen and hired a food development expert to cook up new menu items. “We haven’t given up on it, and we are excited about the potential for growing the brand,” Wall said. Sizzler restaurants, once a steak and potatoes affair, now offer several chicken dishes, meat loaf, ribs, pastas and shrimp for under $9.99. The company is also expanding the Sizzler stores through franchising. The improvements have led to a significant rise in Worldwide’s stock price, from the low $2 range a year ago to the mid-$3.00 range. On Friday, Oct. 10, shares closed at $3.36.
