Costs from canceled ASAP unit lead CPK to adjust outlook

Nation's Restaurant News,  July 23, 2007  by Sarah E. Lockyer

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LOS ANGELES -- California Pizza Kitchen Inc., noting that its ASAP fast-casual concept needs fine-tuning, reduced this month its second-quarter per-share earnings outlook by 2 cents despite upbeat sales because of costs associated with halted construction of a planned ASAP unit.

California Pizza Kitchen, which operates, licenses or franchises 213 restaurants under its full-service namesake casual-dining brand and the ASAP concept, said it now expects to earn 21 cents per share for the second quarter ended July 1. A year earlier, the company posted per-share earnings of 20 cents.

Excluding the costs for starting and then stopping construction of the planned ASAP location, California Pizza Kitchen would have earned 23 cents per share, which would have been within its previously announced earnings target range.

The ASAP brand, which boasts about 24 units, "needs to be refined," Sue Collyns, the company's chief financial officer, said in an interview. "The capital costs are being addressed."

The company had previously alerted shareholders to the termination costs for the halted unit, and the expenses are "flowing through" in the second quarter, Collyns added.

Despite the speed bumps with the ASAP brand, California Pizza Kitchen's top line continues to buck the casual-dining segment's negative sales trends.

Its second-quarter corporate revenue increased 16.4 percent to $158.6 million, aided by a same-store sales increase of 5.4 percent.

Collyns attributed the positive results to California Pizza Kitchen's more upscale customer demographic, which is less affected by macroeconomic trends like higher gas prices and increased interest rates. She also pointed to internal initiatives, like a weekly regional director conference call.

"Every week we discuss sales, cost of goods, and other controllables," Collyns said. "If we see a trend we don't like, we can address it straightaway. If initiatives need to be put into place, we can execute them the next day."

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