A strong April helped Pinstripes pick up the spare on fiscal fourth-quarter same-store sales, but Wall Street was far more concerned about the gutterball the bowling-and-bocce focused eatertainment chain threw when it came to profitability.
The Northbrook, Illinois-based chain on Thursday said that its same-store sales increased 0.4% in the quarter ended April 28, thanks largely to a strong April, when the key metric increased 8%. Traffic was positive for the quarter, too.
Yet the company reported far weaker profitability than expected. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization that had been adjusted for one-time events, was a loss of $5.4 million, down from negative $2.4 million a year ago.
EBITDA margin at the store level was 3.7%, down 456 basis points compared to a year ago. The company reported a net loss of $8.7 million.
The weak expectations sent the company’s stock plunging 9% on Friday. The company, which went public late last year in a reverse merger with a special purpose acquisition company, or SPAC, is down 69% so far this year.
“We’re seeing what everybody else is seeing,” Dale Schwartz, founder and CEO, told investors on Thursday, according to a transcript on the financial services site AlphaSense, referring to weakness in the consumer. “We’re seeing some consumer softening that everyone’s seeing, but nothing drastic.”
Pinstripes is one of a generation of brands that combine some form of entertainment, like golf, pickleball or bowling, with restaurant fare. The chain operates 17 locations after opening two locations last quarter.
The company does a healthy business in events, which helped fuel the chain’s sales growth in April. Each store does about 1,000 events per year, which generates nearly half the company’s revenue.
The chain’s same-store sales were down 5% in February and flat in March.
Pinstripes is putting its profitability hopes into cost cuts at more mature locations. Those more mature locations improved profitability last quarter, with EBITDA margin 11.4% of sales, up from 8.3% a year earlier.
But executives believe they can improve that further. Schwartz said the company in recent months identified potential cost cuts that would save $10 million a year. That would improve those store margins by 500 basis points starting next fiscal year.
Half of that would come from labor, Schwartz said, and another $4 million would come from operating expenses with the rest being cuts in liquor and food costs. The company has already started making the changes.
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