Bojangles’ profits rise slightly, sales up

The Bojangleson Charlottetowne Avenue at Third Street just southeast of uptown Charlotte.
The Bojangleson Charlottetowne Avenue at Third Street just southeast of uptown Charlotte.

Bojangles’ Inc. said Thursday that its second-quarter profits rose slightly, up 1.5 percent from the same time last year, as the company opened more restaurants and continued to expand.

The Charlotte-based restaurant chain earned $6.3 million in profits from almost $121 million in sales during the 13-week period ending June 28. That’s compared to a $6.2 million profit during the same period last year. Sales at stores open for a year or more, considered a key performance measure, were up 4.4 percent.

Year-to-date, revenues rose to $235 million, up from $203 million last year.

Bojangles’ opened 13 new locations in the past three months. The company now operates 646 restaurants, about two thirds of which are in the Carolinas and almost all of which are in the southeast.

The chain plans to grow aggressively in markets outside of the Carolinas, chief executive Clifton Rutledge said during a conference call with analysts.

“We have every reason to believe and be excited about our adjacent market growth,” he said, adding that 90 new locations have been approved in addition to 29 already opened so far this year.

The restaurant chain, founded in 1977, completed its initial public offering in May. Analysts anticipated the publicity following its IPO would boost sales.

Bojangles’ geographic concentration is considered both an advantage and risk, SunTrust analyst Jake Bartlett wrote in a report.

“This has been a strength given faster than average population growth in this region, but could become a weakness, as factors such as employment growth, wage growth and inflation vary by region,” Bartlett wrote.

The chicken-and-biscuits maker has paid more this year than last for chicken, which accounts for about 38 percent of total costs of goods sold, chief financial officer John Jordan said during the call.

However, rising chicken costs are “more than offset” by lower prices for pork and dairy, Jordan said. Avian flu drove egg prices up 100 percent compared to a year ago, according to a Wells Fargo report, but eggs only make up 2 percent of the chain’s commodity exposure.

Looking ahead, Jordan expects the company’s food costs to rise toward the end of the year as it starts serving turkey products. He anticipates turkey to cost significantly more than last year.

Bojangles’ is continuing to bet heavily on breakfast. “Bojangles’ is almost synonymous to breakfast,” Rutledge said in a June conference call.

The company makes 38 percent of its sales before 11 a.m., higher than McDonald’s, Starbucks and Panera, he said. And Rutledge is confident facing increased competition from chains such as McDonald’s and Taco Bell.

“We can compete with anybody when it comes to breakfast,” Rutledge said during Thursday’s call.