DALLAS - Sept. 23, 2016 // PRNewswire // - RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the fourth quarter and fiscal year ended 2016 ended June 26, 2016.
RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today announced results for its fourth quarter and fiscal year ended June 26, 2016. 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 reduced income from Company-owned restaurants. Similarly, net loss of $8.9 million for fiscal 2016 was $7.0 million greater than prior year primarily due to $1.7 million of impairment charges, a$4.9 million valuation allowance against deferred tax assets, and reduced income from Company-owned restaurants. 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," said Clinton Coleman, Interim Chief Executive Officer for Rave Restaurant Group, Inc. "Comparable store sales in ourDallas-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," said Coleman. "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."
Total revenues for the fourth quarter of fiscal 2016 and the comparable prior year quarter were $15.7 million and $13.9 million, respectively, an increase of 13.3% year over year. Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened. Pizza Inn domestic comparable store retail sales increased 0.3% from the same period in the prior year.
For Pie Five, system-wide retail sales increased 59.2% for the fourth quarter of fiscal 2016 when compared to the same period in the prior year driven by an 87.9% increase in average units open and a 14.5% decrease in the system-wide average weekly sales. The decrease in average weekly sales was due to both weaker sales in newer markets and challenging economic conditions in the restaurant industry. Comparable store retail sales decreased by 12.0% for the most recent fiscal quarter compared to the same period in the prior year.
Total revenues for the fiscal year 2016 and the comparable prior year were $60.8 million and $48.2 million, respectively, an increase of 26.2% year over year. Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened. Pizza Inn domestic comparable store retail sales decreased 1.0% from the prior year.
For Pie Five, system-wide retail sales increased 110% for fiscal 2016 when compared to the prior year, driven by a 138% increase in average units open and a 10.0% decrease in the system-wide average weekly sales. The decrease in average weekly sales was due to weaker sales in comparable restaurants and lower than average sales levels of newer Company-owned restaurants. Comparable store retail sales decreased by 5.1% compared to the prior year.
"In the current first fiscal quarter, the Pie Five system has continued to experience difficult sales trends," said Coleman. "Many of the newer restaurants that enter the comparable store base continue to experience a decline in sales from their initial year, particularly in the case of those stores that opened with very high sales volumes. The Pizza Inn system's sales trends have been flat in the current quarter."
In the fourth quarter of fiscal 2016, three new Pie Five franchise restaurants were opened, bringing the fiscal year-end total unit count to 88 Pie Five restaurants in 22 states. So far in the current first fiscal quarter franchisees have opened six new restaurants and the Company signed two new franchise development agreements in Louisiana and Nevada for up to 16 additional Pie Five restaurants. The Company currently has Pie Five franchise restaurant development commitments for up to an additional 347 restaurants.
"The Pie Five system continues to grow across the country with a strong pipeline of restaurant openings scheduled for the next several quarters," said Coleman.
Pizza Inn franchisees opened four new restaurants during the year while closing 21 restaurants domestically and 11 internationally, ending the fiscal year at 222 total Pizza Inn Company-owned and franchised restaurants worldwide.
The Company uses certain non-GAAP financial measures in evaluating operating performance. These non-GAAP financial measures should not be viewed as an alternative or substitute for its financial statements prepared in accordance with generally accepted accounting principles. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense, costs related to impairment, non-operating store costs and discontinued operations. A reconciliation of Adjusted EBITDA to net income is included with the accompanying financial statements.
Certain statements in this press release, other than historical information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created thereby. These forward-looking statements are based on current expectations that involve numerous risks, uncertainties and assumptions. Assumptions relating to these forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of RAVE Restaurant Group, Inc. Although the assumptions underlying these forward-looking statements are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that any forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of such information should not be regarded as a representation that the objectives and plans of RAVE Restaurant Group, Inc. will be achieved.
Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates and franchises more than 300 Pie Five Pizza Co. and Pizza Inn restaurants domestically and internationally. Pie Five Pizza Co. is a leader in the rapidly growing fast-casual pizza space offering made to order pizzas made in under five minutes. Pizza Inn is an international chain featuring freshly made pizzas, along with salads, pastas, and desserts. The Company's common stock is listed on the Nasdaq Capital Market under the symbol "RAVE". For more information, please visit www.raverg.com.
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RAVE Restaurant Group, Inc.
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SOURCE RAVE Restaurant Group, Inc.
Founded in 1958, Dallas-based RAVE Restaurant Group owns, operates and franchises Pie Five Pizza Co. and Pizza Inn restaurants domestically and internationally.