BJ’s Eating places (BJRI) This autumn 2024 Earnings Name Transcript

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Buyers ought to confer with the total dialogue of dangers and uncertainties related to forward-looking statements contained within the firm’s filings with the Securities and Alternate Fee. We are going to begin right now’s name with ready remarks from Brad Richmond, our interim chief government officer; adopted by Lyle Tick, our president and chief idea officer; and Tom Houdek, our chief monetary officer. After our ready remarks, we are going to take your questions. And with that, I’ll flip the decision over to Brad Richmond.

Brad?

Brad Richmond — Interim Chief Government Officer

Thanks, Rana, and good afternoon, everybody. We recognize you becoming a member of us right now as we focus on our fourth quarter and full yr 2024 efficiency, in addition to our outlook for 2025. Earlier than we dive into our outcomes, I would wish to take a second to acknowledge the devastating affect of the wildfire right here within the Los Angeles space. Our ideas and prayers exit to everybody affected by these fires.

I need to specific our deep gratitude to the primary responders, who labored tirelessly in these difficult circumstances. I would additionally like to increase a heartfelt thanks to our native restaurant leaders, staff members who’ve gone above and past offering assist to the primary responders and native residents, providing meals, refreshments, and even secure areas for these affected by the fires. We could not be prouder of their neighborhood engagement and spirit of generosity. We additionally know that a few of our staff members have been instantly impacted and some have tragically misplaced their houses.

BJ’s staff member assist fund, which we name Give us Life, got here to assistance from these members of their time of want. The fund is supported by voluntary donations from staff members who contribute from every of their paychecks. We’re grateful for his or her generosity and assist of the BJ’s household. Now turning to the fourth quarter.

I am happy to report that the breadth of our momentum of our progress is clearly mirrored in our monetary efficiency. Comparable same-restaurant gross sales have been very robust. Margins continued to enhance, and our money circulate is each resilient and growing. What’s much more thrilling is that there is nonetheless ample alternative to construct upon these achievements and additional strengthen every of those key monetary metrics as we transfer ahead.

We made important progress on our first part of initiatives, and I am impressed by what we have completed in such a short while. This progress additionally fuels my optimism as I see extra untapped potential for the BJ’s model within the close to time period. Our early targets have been met, the inspiration is strengthening, and we now have extra readability and actionable plans in place to drive future success. To offer deeper insights into our latest progress and near-term initiatives, Lyle will focus on our model positioning efforts and progress plans later within the name, and Tom will evaluate our fourth quarter and annual outcomes and share our expectations for 2025.

However earlier than he does, let me rapidly recap our fourth quarter monetary outcomes. Comp gross sales for the quarter have been 5.5%, pushed primarily by visitor site visitors with energy throughout all dayparts and all channels. Every month of the quarter, we delivered gross sales meaningfully above the Black Field benchmark ranges. Additionally vital to notice, the quarterly comps did profit by roughly 100 foundation factors from favorable vacation shifts.

Our margin enhancement initiatives started to ship significant outcomes late in November and leveraged our top-line progress to attain restaurant-level margins of 15.4%, up 100 foundation factors to final yr. Restaurant-level working revenue reached $52.9 million, a 14% improve to final yr, which set a file for This autumn restaurant profitability. Adjusted EBITDA was $33.1 million within the fourth quarter, a 21% improve from the prior yr. Our adjusted EBITDA margin was 9.6%, a 120-basis-point enchancment from final yr, and we have been capable of ship this important revenue progress whereas making significant investments in model positioning initiatives.

Within the fourth quarter, we engaged in important work round strengthening our model and enterprise mannequin, leveraging exterior sources to extend certainty and speed up the tempo of our efforts. Lyle will go into extra element on this shortly, however we’re energized by the preliminary insights and are excited to carry these recent views to life. Moreover, we made some key management modifications. The costs for these two objects elevated G&A’s roughly 100 foundation factors within the quarter, however are largely transitory and already behind us with solely a small quantity remaining for the primary half of 2025.

We additionally carried out a radical evaluate of our restaurant portfolio and decided that no eating places wanted to be closed. We additionally reassessed our new restaurant pipeline, making use of a extra refined set of standards, which we imagine will result in extra consistency in our new restaurant opening efficiency. This led to the removing of some websites from our new restaurant pipeline as they now not meet our revised standards. These two opinions have been the first drivers of the cost for asset disposals and impairments within the quarter, which I remind you is a noncash merchandise and doesn’t affect our restaurant operations.

In abstract, This autumn was a robust quarter with significant progress throughout a number of areas. I need to lengthen my because of Lyle, our management staff, and our 21,000-plus staff members for his or her exhausting work and agility in delivering these ends in fast order. Their efforts have laid a stable basis as we transfer into 2025. With that, let me flip it over to Lyle to speak extra broadly about our model refresh and progress initiatives.

Lyle Tick — President and Chief Idea Officer

Thanks, Brad. Good afternoon, everybody, and thanks for taking the time to affix us right now. I am now 5 months into my position at BJ’s Restaurant and Brewhouse, and I am very inspired by the progress we’re making driving gross sales and site visitors, in addition to figuring out alternatives to function extra effectively and easily. Whereas we’re initially of the journey and there may be plenty of work forward, we’re getting clear on our core equities the place we are able to drive differentiation whereas additionally setting up the proper initiatives to drive sustainable and worthwhile progress.

We’re at an thrilling juncture for the BJ’s model, constructing on constructive gross sales and margin efficiency in This autumn, whereas additionally sharpening our focus for the long run. Earlier than I look forward, I would wish to briefly double-click on This autumn. We’re happy with our gross sales efficiency, in addition to our margin enlargement initiatives. Importantly, we imagine we are able to proceed to construct upon these initiatives within the close to time period, which is able to present learnings to tell our future actions.

On the gross sales aspect, the Pizookie meal deal and our vacation massive celebration providing resonated with company, and are focusing on our focused advertising investments served as an accelerator in key markets. Whereas our efficiency throughout geographies, days and dayparts have been all encouraging, our efficiency on the weekend when the promotion was not supplied and overperformance in media markets underlying consciousness and consideration headroom for the model, in addition to model affinity once we are high of thoughts. It additionally underlined an actual structural benefit we now have in accommodating and delivering nice experiences for group events. On the margin enhancement aspect, we made progress laying the foundations of initiatives that can assist us be extra environment friendly, however most significantly, will assist us enhance visitor and the staff member expertise.

Our AI forecasting mannequin has continued to enhance and helps our groups enhance meals preparation plans, in addition to labor scheduling and having the proper individuals in the proper place on the proper time. We additionally took a tough take a look at our comped meals and drinks as these typically lead to tough conditions for staff members, lower than very best visitor expertise they usually gradual the eating places down total. We recognized {that a} key driver was objects being run in incorrect or ready incorrect and that the foundation trigger was complexity in how we ring objects into our POS and the way they present up within the kitchen. To provide you simply a few sensible examples of how we handle this, we simplified the method for a way we herald our craft margaritas.

This straightforward change resulted in a couple of 20% lower in comped margaritas and errors making their strategy to company. We added takeout and supply tailor-made cooking and packaging steering to our kitchen show techniques, driving our accuracy scores up about 10%. Whereas each examples benefited margins, their larger impacts have been made by creating higher staff and visitor experiences. Our operations and expertise groups are partnering and persevering with to work on mapping extra simplification alternatives.

On the services and tools aspect, we accomplished two vital initiatives. We tagged each crucial piece of kit throughout our system with a QR code that permits us to trace restore historical past, handle guarantee work, and apply predictive analytics to find out the optimum substitute cycle. That is making certain our tools is in the very best working order for our staff members and likewise finally supplies financial savings and efficiencies in our R&M spend. It is all about setting our groups up for achievement.

We additionally carried out preventative upkeep applications for main kitchen and HVAC tools. Early suggestions from the staff signifies this work has improved their expertise with much less tools failures, and we’re saving with less expensive and frequent restore orders. Taking a proactive strategy with our services and tools is paying quick dividends, and we imagine there’s extra alternatives forward. Lastly, as a part of the menu work, we’re within the technique of taking a complete take a look at our price technique and promotional platforms.

In the end, we need to be sure that our company searching for an excellent on a regular basis value level have craveable choices they’ll rely on and that our company searching for an accessible splurge or deal with have thrilling premium BJ’s handcrafted choices, all of which ship an excellent worth for the position that they play on our menu. These near-term initiatives present a springboard for our longer-term technique. Since our final name, we now have additionally accomplished in depth model analysis to raised perceive our core shoppers’ wants, our model’s core equities, and the way we are able to uniquely ship worth to our company. This has allowed us to make clear BJ’s model positioning, which supplies focus and readability to the groups as we transfer ahead.

There’s a cross-functional staff that’s now diligently engaged on our plans to place the model for sustained worthwhile progress within the mid to long-term focus, 4 strategic priorities, which embody the staff member expertise, our handcrafted meals and beverage, delivering WOW hospitality, and protecting our environment recent. First, I would like to speak a little bit bit about our staff member expertise. At BJ’s, we’re working from a relative place of energy right here. Our turnover is under pre-pandemic ranges and under trade norms and we see a excessive correlation between supervisor tenure and restaurant efficiency.

Our managers and staff members are the heartbeat of BJ’s, and our analysis indicators that our hospitality is usually a actual differentiator for us. Properly, we additionally know from our analysis and from our staff members is that we now have a possibility to supply nice hospitality extra constantly. To allow this, we’re targeted on two areas within the brief to medium time period. simplification and coaching.

On the simplification aspect, there’s two fundamental elements. One is addressing job saturation. Our groups are within the enterprise and at BJ’s particularly as a result of they need to ship nice visitor experiences. We now have a staff targeted on figuring out and eliminating or automating duties that don’t add worth to our company or get in the best way of our managers and staff members working as effectively as attainable.

The opposite a part of simplification is simplifying our processes and techniques. As I discussed earlier than, we’re working to simplify our POS and kitchen show techniques and processes, together with how objects are rung in and the way they present up within the kitchen, and that is already exhibiting promising outcomes. Turning to coaching. Our managers and staff members alike have advised us we now have a possibility to assist them higher with coaching.

That is an space the place placing the proper stability of expertise and shoulder-to-shoulder coaching is essential. Throughout and since COVID, coaching for a lot of has gone virtually all digital. Our staff members have advised us that extra shoulder-to-shoulder coaching is vital. To deal with this, we now have simply rolled out new staff member coaching and new supervisor coaching is following go well with.

The coaching makes the digital modules extra streamlined and will get staff members shoulder-to-shoulder faster. The suggestions has been very constructive. What I am listening to from our managers is that they’re seeing that it is serving to in hiring and retention within the first 90 days as a result of our new staff members get buddied up from the start and extra rapidly really feel a part of our neighborhood and are executing higher for our company. The second strategic precedence is our handcrafted meals and beverage.

The model work we now have carried out has strengthened that we had some highly effective core pillars of our menu with robust model fairness and associations, in addition to some rising alternatives. The work we’re doing on the menu is centered on making strategic selections about the place we are going to drive significant differentiation, whereas additionally figuring out alternatives for simplification. Pizza, our world-famous Pizookie and our award-winning craft drinks anchored in our craft beer program are clear areas of robust model fairness and affiliation. Our wings, steaks, and gradual roast are rising areas of potential energy.

It is also clear from our analysis and visitor suggestions we now have alternatives to enhance shopper satisfaction on a few of these core platforms. In these platforms the place we select to compete to win, we need to guarantee we now have one of the best providing and we are able to ship it constantly nice. That is the place an excessive amount of our focus goes within the brief time period, and I am happy with the progress right here. We additionally recognized a possibility to optimize our menu choices.

Like many, we now have a core group of choices that drive an outsized portion of our complete gross margin. We will likely be focusing throughout classes on the lengthy tail to do two issues. One is streamline, take away objects that aren’t delivering from both a business, model fairness or turf perspective, and it will permit us to attain our second objective, which is to carry thrilling innovation to our company and preserve our core platforms recent. Our third precedence is delivering WOW hospitality.

Hospitality has at all times been on the coronary heart of BJ’s model, and it is a large motive why our loyal company preserve coming again. This pillar is about how we put our managers and staff members in one of the best place to ship WOW Hospitality to our company, each on and off-premise. On-premise, the core focus is round making certain we now have the proper high quality and amount of employees in the proper positions on the proper occasions. As we proceed to evolve our AI forecasting mannequin and labor scheduling, we’re seeing alternatives to be extra environment friendly and efficient as a complete, significantly round our shoulder intervals, whereas additionally figuring out key peak hours the place we’d like extra staff members.

We imagine this, mixed with a number of the simplification efforts I outlined earlier, will put our groups in a greater place to ship our BJ’s WOW expertise extra constantly. And simply past the horizon for off-premise, the primary focus goes to be on delivering a seamless end-to-end expertise and eradicating friction factors. We now have a sturdy off-premise enterprise, about 17% of our complete gross sales and we imagine we now have the proper product providing to proceed to develop within the off-premise. We do, nevertheless, have a transparent alternative to optimize that end-to-end journey and make issues simpler for company and staff members alike, all the best way from how we merchandise our objects and seize that demand to how we finally fulfill and convert that demand.

Lastly, our fourth precedence is about protecting our environment recent. BJ’s environment has at all times been a long-term differentiator for our model. In 2025, we are going to proceed to concentrate on protecting our footprint recent by reworking as much as 30 current places to develop our profitable transform program, whereas persevering with to optimize primarily based on learnings. We plan to open one new restaurant in 2025 in Queens Creek, Arizona in simply a few weeks, and we’re very enthusiastic about this restaurant and imagine it is going to be accretive to our complete restaurant portfolio.

Along with this, our staff has been carefully analyzing latest restaurant openings to determine key success elements and maximize our return on funding. The preliminary findings are promising. And as such, we are going to return to constructing our new restaurant pipeline with extra eating places to come back in 2026. Our capital expenditures in 2025 associated to new restaurant openings will rely upon how rapidly we are able to develop a extra sturdy and focused pipeline that aligns with our refined standards for brand spanking new places.

We’re excited in regards to the future unit progress for BJ’s and we are going to preserve you up to date as we transfer all year long. Whereas I am happy with the progress up to now, we’re early on this journey. The readability we have gained from our model analysis, our operator suggestions, and learnings from latest efficiency, mixed with the organizational alignment behind these strategic priorities give us confidence within the path forward. Thanks.

And now I need to flip it over to Tom to supply extra element on our fourth quarter outcomes and our outlook for 2025.

Tom Houdek — Chief Monetary Officer

Thanks, Lyle, and good afternoon, everybody. Earlier than taking a look at our fourth quarter outcomes, let me mirror on what we completed in 2024. Throughout the yr, we generated file gross sales of $1.36 billion as our gross sales driving initiatives gained traction all year long, culminating with 5.5% comp restaurant gross sales progress in This autumn. We produced file restaurant stage money circulate of $195.6 million, which elevated by 10% from 2023 ranges.

We improved our restaurant margins by 110 foundation factors to 14.4% for the total yr, together with 15.4% margins in This autumn and we delivered adjusted EBITDA of $117.1 million, which was 13% larger than the prior yr. Turning to the fourth quarter. We generated gross sales of $344.3 million, which was 6.4% larger than final yr. On a comparable restaurant foundation, This autumn gross sales elevated by 5.5%, pushed primarily by site visitors progress.

This represented our greatest comp efficiency since 2018 when excluding the COVID restoration quarters as our gross sales driving initiatives labored to develop gross sales, site visitors and market share in the course of the quarter. In This autumn, our comp gross sales beat the trade by 3.7 proportion factors and our site visitors beat by 6.8 proportion factors as measured by Black Field. Our site visitors outperformance was pushed largely by our key promotion, the Pizookie meal deal that we launched in September, in addition to an funding in media to construct consciousness of this promotion and the BJ’s model total. We additionally constructed visitor pleasure round limited-time choices similar to our Spooky Pizookie and the twenty fifth anniversary of our Grand Cru Belgian ale.

Our restaurant-level money circulate margin was 15.4% in This autumn, which was 100 foundation factors higher than a yr in the past. We successfully leveraged our robust gross sales and delivered enhancing margins, whereas additionally investing in meals and advertising prices. Our restaurant-level working revenue elevated 14% to $52.9 million for This autumn, which marks our most worthwhile This autumn ever. We’re happy with our progress on enhancing our margins up to now.

And as Lyle and Brad outlined, we now have a variety of methods and initiatives to proceed to develop margins each on a greenback and proportion foundation going ahead. Adjusted EBITDA was $33.1 million and 9.6% of gross sales within the fourth quarter. This autumn EBITDA was $5.8 million larger than final yr, whereas additionally marking or making longer-term investments in our model positioning, which Brad and Lyle each highlighted. We reported a web lack of $5.3 million and a diluted web loss per share of $0.23 on a GAAP foundation for the quarter.

The online loss included just a few extraordinary objects, together with a $15.4 million cost for loss on disposal and impairment of property, a $4.6 million cost associated to an extension of a warrant, and a $1.5 million cost associated to management transition prices. However the loss on disposal and impairment of property was elevated this quarter as we accomplished a evaluate of our current eating places and potential future websites, leading to plenty of impairments and our deliberate substitute of our pizza pans as we work to improve the pizza class of our menu. We added supplemental non-GAAP metrics to our earnings launch to account for this stuff. Adjusted diluted web earnings per share grew 5.1% to $0.47 per share in comparison with $0.45 per share final yr.

For extra element on restaurant bills, our value of gross sales was 25.9% within the quarter, which was 40 foundation factors larger than a yr in the past. Meals value inflation was roughly 3.5% yr over yr, which we didn’t totally recapture in menu pricing. Additionally, our Pizookie meal deal had modestly larger meals prices than our menu common. Labor and advantages bills have been 35.8% of gross sales within the quarter, which was 70 foundation factors favorable from final yr.

Our restaurant groups hit their stride, delivering robust outcomes and leveraging labor effectively, whereas nonetheless sustaining robust visitor sentiment scores as we drove significant site visitors and gross sales within the quarter. Occupancy and working bills have been 22.9% within the quarter, which was 70 foundation factors favorable in comparison with the fourth quarter of final yr. We proceed to attain robust effectivity positive aspects over the prior yr from our value financial savings initiatives and leverage from larger gross sales. We achieved these total O&O positive aspects whereas investing 50 foundation factors in extra advertising, which was efficient at driving incremental site visitors to our eating places.

G&A was $23.7 million within the fourth quarter. Included in G&A was a $2.1 million value associated to the acceleration of our model positioning work and $1.5 million associated to management modifications. With out these prices, This autumn G&A was roughly 1% decrease than our expectations. Throughout the quarter, we repurchased and retired roughly 234,000 shares of frequent inventory at a value of $8 million.

Reflecting the progress on our plans and our money circulate progress expectations, our board of administrators accredited a rise within the repurchase program by $50 million. We at present have roughly $83 million accessible beneath our share repurchase program. Turning to the stability sheet. We ended the fourth quarter with web debt of $40.4 million, comprised of a debt stability of $66.5 million much less money and equivalents of $26.1 million.

This equates to a $7.7 million discount in web debt from our stability on the finish of Q3. Subsequent, we supplied our 2025 monetary outlook right now. We anticipate full yr comparable restaurant gross sales within the 2% to three% vary. This takes into consideration a number of third-party forecasts for each food-away-from-home and trade site visitors, in addition to our personal idiosyncratic progress drivers.

This forecast additionally accounts for latest gross sales tendencies, which have softened considerably from This autumn 2024 ranges on account of climate in sure markets and extra common conservatism in shopper spending popping out of the vacations. Particular to Q1, we proceed to ship constructive comp gross sales and site visitors and proceed to beat the Black Field index on each of these measures, although the unfold has tightened since This autumn. We count on Q1 comp gross sales close to 2%, which assumes the latest climate headwinds start to average as we transfer by the rest of the quarter, which has tended to be the case traditionally. Our full yr 2025 steering assumes comp gross sales shifting larger in Q2 and Q3, much like anticipated Q1 ranges with out the climate affect earlier than moderating in This autumn as we lap our strongest comp gross sales from 2024.

We count on restaurant-level working revenue within the $205 million to $215 million and adjusted EBITDA of $127 million to $137 million. These profitability ranges take into consideration a variety of top-line eventualities, in addition to our expectations for inflation and the initiatives deliberate for this yr to drive elevated profitability, whereas investing to place BJ’s model for future success. We count on the common seasonality in our profitability and extra margin enlargement within the second half as extra margin-building initiatives are carried out. We count on capital expenditures of $65 million to $75 million.

In 2025, we plan to open one new restaurant and transform as much as 30 current places. By the top of 2025, roughly 60% of BJ’s eating places will both be latest prototypes or have been refreshed inside the previous 4 years as a part of our ongoing transform initiative. Our capital expenditures in 2025 associated to future restaurant openings will rely upon the pace at which we are able to develop a extra sturdy and focused pipeline that aligns with our refined standards for brand spanking new places, as Lyle outlined. Lastly, we count on to repurchase $40 million to $50 million of shares in 2025.

Our elevated repurchase program will present ample capability to execute on our repurchase plan this yr. In closing, we’re happy with our fourth quarter outcomes and the robust basis we’re constructing for sustainable, worthwhile progress. We now have a transparent path to gross sales and revenue progress forward and our long-term technique and the robust shopper attraction of the BJ model place us nicely to proceed constructing on our successes. With robust and enhancing money circulate, increasing margins, and a wholesome stability sheet, we’re well-positioned to execute a number of initiatives aimed toward enhancing shareholder worth.

Thanks on your time right now, and we’ll now open the decision to your questions. Operator?

Questions & Solutions:

Operator

We are going to now start the question-and-answer session. [Operator instructions] Right now, we are going to pause momentarily to assemble our roster. The primary query comes from Alex Slagle with Jefferies. Please go forward.

Alex Slagle — Analyst

Congrats. Nice to see the progress by the quarter. A few issues I simply need to make clear. First, on the restaurant stage revenue steering and the implication for restaurant stage margin, I suppose if we assume revenues are up a little bit bit, perhaps low single close to mid-single digits, I suppose, towards the decrease finish, actually simply given the unit progress.

I imply, restaurant stage margin, ought to we assume them type of flat to up 50, 60 foundation factors? Or how ought to we form of make clear the margin implications?

Tom Houdek — Chief Monetary Officer

Certain, Alex, and thanks for the query. As we take a look at the yr forward, we see a path to develop margins. So, within the vary we gave on the higher finish, it actually is — it does indicate margin enlargement. Even on the decrease finish, a little bit little bit of that enlargement.

And it truly is throughout the classes of margin. We see alternatives in meals value, in labor, and O&O. There may be some reinvestment that is occurring that helps us construct site visitors and proceed to beat the trade. However net-net, we do see a path for margin enlargement and are planning for it.

Alex Slagle — Analyst

OK. And the pricing expectations, you talked about, I suppose, the pricing lagged a little bit bit, the inflation, however if you happen to may discuss to what you are pondering on pricing and if you happen to suppose that will likely be sufficient to offset the inflation?

Tom Houdek — Chief Monetary Officer

Sure. As we take a look at simply typically round comp proper now, it is largely pushed by site visitors. And entering into the parts of verify, there may be pricing, and we now have underpriced by way of inflation. We like what that is exhibiting by way of our price scores, our completely different scores as we measure the visitor, and the way that is driving site visitors.

But additionally, simply taking a look at combine shift, we’re seeing some combine shift into issues like Pizookie meal deal. There may be some unfavourable combine shift in our off-premise channel nonetheless. So, net-net, as we take a look at the forecast for this yr, our expectations, it is largely pushed by site visitors. There will likely be some pricing in there.

We’ll value to offset inflation, however that is not a driver of the place the margin enchancment is coming from, or the place we’re anticipating our initiatives to be the motive force there.

Brad Richmond — Interim Chief Government Officer

Hey, Alex, Brad right here. And I might simply soar in as nicely that we now have a number of arrows in our quiver now marked to round margins. And so, you are going to discover us remaining fairly agile there. We actually need to construct the entire absolute {dollars} of profitability is what we’re after.

And so, we have had some success already with that. We will proceed to discover that. And so, sure, the margin percents are vital, however we’re extra guided by absolutely the {dollars} that we are able to drive, significantly once you take a look at our unit economics, very massive field, excessive AUVs. And as you noticed within the fourth quarter, driving just a bit little bit of gross sales there supplies leverage all the best way down the P&L.

Chances are you’ll not see it as a lot on meals prices, given simply the place the associated fee buildings are lately. However I feel the true message to remove is there’s rather a lot we are able to do. We will stay agile. We have realized rather a lot.

We’re nonetheless studying much more. However placing the steering out for the yr that we really feel snug that we must be in that vary. And because it develops the yr, we’ll replace that. However do not foresee proper now any main modifications to that.

Alex Slagle — Analyst

OK, thanks for that.

Operator

The following query is from Todd Brooks with the Benchmark Firm. Please go forward.

Todd Brooks — Analyst

Hey, good night, guys, and congrats on only a actually stellar fourth quarter. A few questions, if I’ll. One, with the success that you just talked about with some incremental advertising spend within the fourth quarter, how are you fascinated with utilizing advertising as a lever to drive site visitors going into fiscal ’25? And any ideas on form of a proportion declare on gross sales for advertising spend? Or is it extra completely different in new ways? If you happen to may simply form of dig into that a little bit bit, that might be nice.

Lyle Tick — President and Chief Idea Officer

Yeah, thanks for the query. That is Lyle, by the best way. To start with, I imply, we’re nonetheless studying, proper? We had clearly an excellent This autumn and I feel as I’ve talked about earlier than, we noticed outperformance in our media markets, and we noticed much more outperformance in our non-California media markets the place we now have the larger hole on consciousness and consideration. So, these issues counsel there’s headroom there, and we’ll take these learnings to form what we’re doing going ahead.

I might say at this level, although, strategically, we’re not planning main shifts in our spend technique. It is going to stay very focused, taking a look at accelerating efficiency in California and a few of our different form of core markets the place we now have some lagging consciousness and consideration. We’re not going to out of the blue form of be going on the market and making an attempt to compete for share of voice with a number of the large nationwide media spenders. We will must proceed to be environment friendly and choiceful in regards to the spend.

And I feel given the share positive aspects that we noticed in This autumn and the outperformance in these media markets, I am inspired that we will be form of choiceful about the place we do issues. And as soon as we get some extra time beneath our belt, we are able to resolve if we need to make any type of materials modifications or acceleration there. From a channel viewpoint, it’s useful, proper? We aren’t a giant linear TV spender. We’re searching for extra environment friendly methods to get in and spend our cash and discuss to our goal.

And so, our broadcast is extra linked TV versus linear and closely in digital and social.

Todd Brooks — Analyst

And then you definitely highlighted form of core model pillars that BJ’s has been capable of ship for a very long time after which some rising classes that you just hope may develop into these model pillars. If you consider what labored value-wise in This autumn, particularly round Pizookie meal deal, are you delivering sufficient worth primarily based on the outcomes? And I might argue that the outcomes most likely say, sure, we’re, at the very least at that cut-off date in This autumn. And ideas on how do you ship worth throughout fiscal ’25? Is it take what’s labored in This autumn and proceed it in some type of perpetuity right here? Or are there different levers that you would pull confidently that you just really feel may very well be as impactful as Pizookie meal deal was?

Lyle Tick — President and Chief Idea Officer

Sure. Thanks for the query. I feel it is most likely a little bit of a multifaceted reply. In your first half, like is there extra headroom with the Pizookie meal deal? We like what we’re seeing within the Pizookie meal deal.

We just like the site visitors that it is motivating. We’re truly seeing as individuals are available in the course of the week, we have seen form of a halo profit in non-Pizookie meal deal classes with some unit progress in different areas. So, individuals coming in, any individual on the desk getting Pizookie meal deal, any individual on the desk not getting Pizookie meal deal. So, we like that.

We like what we have seen by way of the advertising is overhang into the weekend, in order that when the deal just isn’t on and we now have consciousness, we are able to drive it. So, we expect there’s extra with Pizookie meal deal. I feel we additionally need to take this chance, as I discussed in my remarks, to take a complete take a look at our price technique and promotional platforms, in order that we are able to actually lean into the issues which are working after which retire a number of the issues that might not be. After which the final half in regards to the worth technique is, I am a giant believer within the worth equation, which is the expertise that we’re delivering the meals expertise and the service expertise over the value.

And what we have to do is proceed to have issues just like the Pizookie meal deal for these company which are searching for that form of on a regular basis worth that could be extra pushed by value and ensure that our premium form of handcrafted trade-ups are delivering the best way they need to ship in order that we now have each ends of that visitor being glad with worth as they see it. So, worth to me is form of the holistic event and is utilized otherwise to completely different company, if that is smart or completely different cohorts.

Todd Brooks — Analyst

Sure, that is nice. Thanks. And yet one more, and I will soar again in queue. Tom, if you consider the commentary of anticipating you get to 2% same-store gross sales within the first quarter, is there a strategy to quantify what’s been misplaced to climate and probably the fires within the California market so far as both misplaced service days yr over yr or perhaps alternatively, I do know that you just usually discuss how robust these tent-pole holidays are, which I imagine Valentine’s Day is one among them for the model.

Simply both or each that the place we are able to get at, OK, the energy of the patron when not disrupted by these exogenous elements and assist us perceive, OK, 2% with out these headwinds is de facto working nearer to mid-single digit than low single digits? Thanks.

Tom Houdek — Chief Monetary Officer

Yeah. Thanks for the query, Todd. The best way that I take a look at it or we take a look at it, taking a look at January and the comp actually when climate was a cleaner lap, that was nearer to, name it, larger finish of our full yr information. Since coming into February, we have seen much more climate impacts that actually did weigh on outcomes.

So, there may be — I talked about this within the steering that an assumption that, that moderates as we undergo the by the quarter as we end the quarter up right here. However sure, there was some — actually, for the total quarter, it is value most likely over 100 foundation factors from the climate we have seen to date. Not as a lot on the California fires as there’s been — there was a few eating places within the nearer vicinities, however I feel we have — you see some days you are impacted. You see some days the place we get extra site visitors coming into the restaurant.

So, net-net, nothing to report actually on the California-specific space aside from what Brad talked about of some very nice work by our groups and supporting the communities. However as comp goes, that will not have a lot of an affect on the quarter. It truly is getting by the climate piece right here and popping out of that’s the place we see hitting again to extra of the true run price.

Todd Brooks — Analyst

Thanks.

Operator

Thanks. The following query is from Brian Mullan with Piper Sandler. Please go forward.

Brian Mullan — Analyst

Hey, thanks. Simply query in your simplification efforts. On the menu aspect, within the ready remarks, one of many stuff you talked about was streamlining. So, I am guessing you see a possibility to shrink the scale of the menu.

So, do we now have that proper? And in that case, any sense of the scope or the magnitude of what you would possibly have the ability to do? After which how a lot time you would want earlier than you’ll need to transfer ahead with one thing like that?

Lyle Tick — President and Chief Idea Officer

Yeah, certain. That is Lyle once more, by the best way. So, as we take a look at the menu and you consider simplification, this isn’t new by way of BJ’s, however we now have a focus of things which have a focus of our gross margin. And so, as you begin to take a look at that, you start to take a look at form of the lengthy tail of things throughout your classes.

And people are the form of focused alternatives that you must take a look at how do you streamline these objects that are not both particularly distinctive to you from a model fairness viewpoint, might not be delivering from a business perspective or is perhaps stepping on one other merchandise from a turf perspective. I haven’t got proper now a focused variety of objects that we wish to take away, however I completely do see the chance to finally streamline our menu. And I feel it is a stability by way of supplying you with some coloration on how we give it some thought. With the menu the best way it’s now, we do not have a number of room to carry new information and innovation and even preserve information on our core platforms to maintain them recent.

So, as we’re in a position to enter the menu and streamline a few of these objects which are within the lengthy tail, we offer ourselves a possibility to then carry new information on our core platforms and actually concentrate on these areas, whereas web finally having a menu that is simpler to execute for our staff members. So, I haven’t got a focused quantity as but as we undergo that work and that turns into extra clear, blissful to share that sooner or later. By way of when that course of will begin, you are most likely trying extra towards the second half of this yr as we take a look at a few of our deliberate menu reprints as our first alternative to take a look at taking some issues down, in addition to whereas we try this, offering some new information to company.

Brian Mullan — Analyst

OK. Thanks for that. After which only a follow-up. I might be curious to get your evaluation of the service ranges within the shops proper now, assuming you’ll be able to discover efficiencies elsewhere, do you envision having the ability to put extra labor hours within the entrance of the home or perhaps that is not even crucial? Simply could be nice to get your ideas on the state of that at BJ’s proper now.

Lyle Tick — President and Chief Idea Officer

Sure, I imply I might say this — what we hear from our analysis and the model work that we have carried out is within the locations the place we’re doing it nicely, it’s a actual differentiator and energy for the model, however that we aren’t delivering that as constantly as we have to throughout the board for each event. And that is the place a number of the issues that I talked about by way of taking a look at how can we take a look at course of simplification, how can we take a look at job saturation and making issues simpler for our staff members is a giant focus for us proper now as a result of we have to make it simpler for them to ship that nice expertise extra constantly. I feel I discussed coaching. I am a giant believer that our enterprise is delivered by individuals, and we’d like the proper coaching and our staff members have been fairly loud and clear about needing an replace to the coaching and that shoulder-to-shoulder coaching.

After which to particularly handle your query, on labor, as we glance ahead, on stability, we’re seeing form of a possibility to get, as I used to be speaking about, the proper individuals in the proper place on the proper time. So, once we take a look at what the info is telling us, it is telling us that on the shoulder hours, what I imply by that’s just like the hours like main right into a dinner and the hours main out of the dinner, we truly perhaps are a little bit unfastened and have a possibility to get tighter. However inside these form of core peak intervals, we may have some extra labor in the proper locations. And the proper locations is de facto distinctive by restaurant, and that is the good thing about a number of the knowledge that we’re taking a look at proper now, the place some eating places would possibly want a little bit extra coronary heart of home labor for a peak time and a few eating places would possibly want a little bit extra front-of-house labor, and we are able to now form of have the info assist us and assist our GMs and getting the proper individuals in the proper place on the proper time.

However on stability, the info is not saying there is a web large funding in labor. It is about getting — transferring the correct amount of labor to the proper occasions is extra what it is suggesting to us.

Brad Richmond — Interim Chief Government Officer

Yeah. That is Brad. I simply need to emphasize what Lyle was saying and first, I would say we — though I am sitting in a special seat, you possibly can’t take the finance man up. So, to me, it truly is about optimizing our hourly labor employees.

And these are large packing containers. They will do large volumes. And you must watch out about simply slicing the associated fee. So, there’s much more instruments right now, much more studying of the right way to actually optimize the labor, put it in the proper locations on the proper occasions, and it makes a giant distinction.

We’re seeing that we now have to serve extra within the first — fourth quarter. We’re seeing it in shopper scores, which ought to bode nicely for future expectations as nicely. So, you take a look at the fourth quarter and total, we added hourly labor. However we expect we bought return, and we leverage the entire P&L.

And so, we’ll consciously be taking a look at these alternatives, and we’re studying as we go, however we expect it is extra of a place of energy to be working for than making an attempt to value reduce our strategy to profitability.

Brian Mullan — Analyst

OK. Thanks, each.

Operator

The following query is from Jeff Bernstein with Barclays. Please go forward. And Mr. Bernstein dropped off the road when he tried to unmute his cellphone.

So, we’ll transfer on to Sharon Zackfia with William Blair. Please go forward.

Sharon Zackfia — Barclays — Analyst

I’ve had that occur to me earlier than, so I am glad it wasn’t me. So, I suppose a query on model positioning. I observe the corporate lengthy sufficient to recollect form of when pizza and beer have been the driving forces behind when individuals went to BJ’s, that was the very first thing you considered. And I am simply curious, it has been a very long time since I’ve heard anyone form of replace form of the place pizza and beer are as a % of the combination, both in California versus historic or in newer markets and form of the place you suppose these ex-California markets are by way of pondering pizza and beer once they consider BJ’s.

Lyle Tick — President and Chief Idea Officer

Yeah. So, let me — that is Lyle, by the best way. I’ll discuss to the final a part of that query, after which Tom might come again round with a number of the specifics. So, I am a giant believer that manufacturers must function from a spot of authenticity and their energy.

And pizza and our craft beer, which has truly developed right into a little bit of a craft beverage program, it’s possible you’ll or might not learn about our sodas and our rising cocktail program. However these are undoubtedly core equities for us. The Pizookie is a core fairness for us. And I feel you must construct from positions of energy.

When you consider the associations of that by geography, in California, pizza is our largest affiliation and our largest site visitors driver. If you look outdoors of California, pizza remains to be a robust affiliation with the model. It isn’t as large of an affiliation or a site visitors driver outdoors of California. One of many issues I feel you heard Tom talked about was in regards to the pizza pans.

One of many different issues we realized was, whereas it’s a large affiliation and fairness for our model, we do have a possibility to enhance shopper satisfaction and visitor satisfaction on that product. So, after I discuss focusing in on the core, one of many large initiatives we’re nicely on our approach on is form of a renovation of our pizza platform as a result of we all know we now have a possibility to wow our company extra with our pizza, the best way I feel we did again at first. However it’s a large a part of our combine. It clearly grew to become much less of our combine over time as we launched gradual roast and steak, however nonetheless an vital driver.

The opposite factor we have realized is, it is an vital driver of a singular event. So, it brings — it is an excellent driver of group site visitors events, brings plenty of individuals collectively, and we discover these checks connect rather a lot to them. So, they’re truly actually good checks from a verify dimension and margin viewpoint. So, we expect pizza is an space of energy that may be rekindled as we go ahead with BJ’s within the subsequent chapter, truly.

Sharon Zackfia — Barclays — Analyst

Thanks for that. After which there was a remark a couple of cautious shopper form of within the comp commentary for the primary quarter. I simply did not know if that was form of a remark that was form of thrown in as a result of who is aware of what is going on on with the patron or if you happen to’re truly seeing form of shifting round on the menu or extra of a value-conscious form of decision-making manifesting to date in your corporation in 2025?

Lyle Tick — President and Chief Idea Officer

Yeah, I imply, to date this yr, what we’re seeing is from a shopper perspective, I imply I would say on stability, we proceed to see resilience. We actually see resilience within the form of 100,000-plus family visitor the place, fortunately, we over-index versus the class. Perhaps some softness within the form of under 50,000 family company. However I would see on stability, like we have not seen a significant like a seismic shift in shopper habits over the primary quarter.

And as Tom talked about, January was a robust month for us that delivered, I would say, the highest finish of our steering even with the New Yr’s calendar shift. And it was actually February the place we have seen extra of a climate affect. So, it might be exhausting for us to level to shopper with the info we now have as being the motive force there proper now.

Sharon Zackfia — Barclays — Analyst

OK. Thanks.

Operator

The following query is from Brian Bittner with Oppenheimer and Firm. Please go forward.

Mike Tamas — Oppenheimer and Firm — Analyst

Hello, thanks, guys. That is Mike Tamas on for Brian. So, clearly, congratulations on the robust outcomes and making such fast progress towards your priorities right here. Because it pertains to the — simply attending to the — from the restaurant stage revenue to your adjusted EBITDA steering ’25, are you assuming that G&A form of holds flat or type of down barely? Are you able to simply discuss that perhaps? Thanks.

Tom Houdek — Chief Monetary Officer

Thanks, Michael. Sure, that is — if you happen to consider 2024 in our G&A, there have been some one-time objects in there. We highlighted some that have been This autumn particular round some additional consulting spend for model positioning work, some management transition prices. So, sure, yr over yr, we’re anticipating G&A down some modest quantity.

Mike Tamas — Oppenheimer and Firm — Analyst

OK. Thanks. After which, Tom, I simply need to make clear on the 2Q and 3Q commentary that you just indicated comp ought to seem like 1Q with out that climate headwind. So, if you happen to’re at 2% in 1Q such as you talked about, you add again that 100 foundation level headwind from climate that you just additionally talked about, that might be like 3% for these quarters.

Is that the proper strategy to interpret that? I simply need to be sure we’re on the identical web page.

Tom Houdek — Chief Monetary Officer

Yeah. Usually, that is how we’re fascinated with the form of the quarter or if the quarters go in. We have been clearly speaking about comp right here, and there is some seasonality that goes into the greenback of WSA and implications of the margins because the flow-through works. So, we sometimes see the best peak of restaurant-level money circulate % in Q2 with Mom’s Day, Father’s Day, graduations.

These are robust for us. We simply had a really robust Valentine’s Day weekend. So, we’re in keeping with being a spot the place individuals come for big events and celebrations. So, we’re anticipating the identical seasonality within the enterprise.

And once more, back-to-school, if you happen to consider seasonality the place we see the greenback gross sales falling off. However sure, on a proportion foundation, on a comp foundation, we’d suppose form of the upper finish of the total yr information for Q2 and Q3 could be the best way to consider it.

Mike Tamas — Oppenheimer and Firm — Analyst

Excellent. Thanks a lot.

Operator

Thanks. The following query is from Jeff Bernstein with Barclays. Please go forward.

Unknown speaker — Barclays — Analyst

Hello, thanks. That is Pratik on for Jeff. Respect you guys squeezing us in right here as I bought disconnected. Simply had a query on the true property pipeline, perhaps an even bigger image query.

You are clearly ramping as much as open new items within the close to future. And in your ready remarks, you spoke of up to date standards for opening these new items. Maybe perhaps you possibly can simply share a number of the fundamental variations between the previous standards and the brand new standards? And simply what perhaps you would see down the road in ’26 and past by way of openings? Would you be targeted on infilling your current markets? Or are you pushing into new markets or some mixture? Any coloration you possibly can present there? I do know it is a bit early, however something could be appreciated. And I’ve a follow-up.

Thanks.

Lyle Tick — President and Chief Idea Officer

Yeah. No drawback. That is Lyle. We now have carried out learning and refined plenty of site-specific standards as we take a look at our unit pipeline and refilling our unit pipeline.

And also you form of nailed it in your query. The 2 largest elements that we’ll concentrate on within the near-term are model consciousness. So, markets the place we now have current and/or rising model consciousness and human capital, which is form of dovetails with the above. These are markets the place we now have the administration and staff member bench energy, I imply these two issues actually shine by in — once we form of consider our eating places and those that we are able to get large hits in a short time on.

So, we will likely be focusing as we take into consideration constructing out that pipeline on current markets the place the model has a robust presence or efficiency versus greenfield or new markets within the short-term. And I feel if you happen to take a look at final yr and the opening in Tracy, California and our opening in Cypress, Texas, that underlines form of that as a profitable technique. And we’re assured Queens Creek, Arizona goes to form of reinforce that as nicely. Now as we form of open the aperture on it, I feel over the medium to longer-term, we are going to flip our consideration to new markets, and we’re assured within the model’s resonance and have seen that.

However what you see with the brand new openings within the new markets is it is a longer ramp as much as get to form of full efficiency. And we expect there’s ample alternative as we take a look at infilling. And actually, in a number of the markets, we expect that may assist speed up a number of the consciousness and consideration hole that we now have available in the market outdoors of California, if that is smart to you?

Unknown speaker — Barclays — Analyst

That makes excellent sense. I recognize that coloration. And simply perhaps yet one more for Brad. You have been within the seat now for about six months.

Simply something excessive stage that you have seen that perhaps stunned you versus your preliminary expectation? Are you able to name something out by way of simply large alternative for future worth creation? Thanks.

Brad Richmond — Interim Chief Government Officer

Yeah, truly, a rush of concepts come to thoughts. So, form of, if I begin again to the start, the model and the enterprise mannequin are most likely a lot more healthy than I initially had thought that it might be, which supplies us a a lot stronger platform to work off of. And I feel a number of of us overlook simply how large our packing containers are and the place our unit volumes can go to, and there is super leveraging that is accessible there. And so, what you see, we’re plotting out right now and Lyle and his management staff have actually that heads down and making an attempt to say, the place are these larger alternatives for us and the way can we go about pursuing — nicely, I would say, first and like the place can we play in these? Which of them are the proper ones for us to go to? After which how can we go and get these? So, I feel there’s a number of potential for this model.

I joke internally saying it is the previous ebook of excellent to nice. We have been model and a stable enterprise mannequin, however there is not any motive we won’t be an excellent model with a superior enterprise mannequin. And so, I am fairly optimistic about that. I feel you heard Lyle lay out form of what’s on the near-term horizon, clearly, engaged on issues past that.

Some will fall off. The brand new ones alternatives will creep on there. However there’s — with the place the model is positioned right now, there’s a number of locations to look.

Unknown speaker — Barclays — Analyst

That is a lot appreciated and congrats guys on a robust end result.

Operator

Thanks. This concludes our question-and-answer session. [Operator signoff]

Length: 0 minutes

Name members:

Rana G. Schirmer — Director of Securities and Alternate Fee Reporting

Brad Richmond — Interim Chief Government Officer

Lyle Tick — President and Chief Idea Officer

Tom Houdek — Chief Monetary Officer

Alex Slagle — Analyst

Todd Brooks — Analyst

Brian Mullan — Analyst

Sharon Zackfia — Barclays — Analyst

Mike Tamas — Oppenheimer and Firm — Analyst

Unknown speaker — Barclays — Analyst

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