Pizza Inn’s owner buys back stock and watches its share price soar

Rave Restaurant Group repurchased shares for the first time in a decade last year as its profitability improved, as did sales at its chains, including Pie Five.
Pizza Inn sales
Pizza Inn recently launched a rebranding and is focused on the dine-in consumer. / Image courtesy of Rave Restaurant Group.

Wall Street loves its share buybacks.

Rave Restaurant Group, the owner of pizza chains Pie Five and Pizza Inn, on Friday noted that it acquired $500,000 worth of its shares last quarter, and another $1.1 million since then, the first time in a decade that the company took such a step. It came after Rave’s brands generated strong sales as its profits took off.

It was all a boon to the company’s share price, which rose 15% in morning trading and is now up 30% for the full year.

To be sure, the stock trades at under $1.50 per share even after the increase, and such low-held stocks are prone to wild swings in prices. Yet it came on a day in which the Russell 2000 stock index declined more than 2%, which ended an ugly week for stocks on a decidedly down note.

“After nine consecutive quarters of profitability, we are transitioning from a turnaround to a stable company primed for growth,” CEO Brandon Solano said in a statement.

Rave’s two brands had struggled going into the pandemic, particularly its fast-casual Pie Five brand, which was closing locations and watching sales fall. Both brands appear to be stable now and are increasingly focused on the dine-in consumer.

At Pizza Inn, same-store sales rose 13.5% in the company’s fiscal fourth quarter. On a three-year basis, its same-store sales are up 13%, based on Restaurant Business calculations. To be sure, the company’s unit count is down 21% over the past three years. But the chain added new buffet locations for the first time in years in 2021.

The brand recently revealed a rebranding and remodeling effort. Solano said it is focused on the dine-in consumer. “While the restaurant industry abandons dine-in, we continue to lean into our differentiated strategy, focusing on the value and variety of Pizza Inn’s buffet while opportunistically capturing delivery and carryout,” he said.

At Pie Five, the story is more complex. The fast-casual pizza chain is less than half the size it was in 2018, with just 31 locations. Same-store sales remain down 1.5% on a three-year basis, and the chain's sales fell even during the pandemic.

The brand is making a big investment in its menu, with plans to ditch the large pies it hoped would bring in group customers. Like Pizza Inn, the brand is focused on dine-in consumers that were the fast-casual brand’s bread-and-butter in its early days. The company is focused on “operational and hospitality improvements” at its franchised restaurants.

That said, Rave revenues rose 19% to $2.8 million for the quarter. Net income was $6.8 million, or 38 cents per share, far higher than the $926,000, or 5 cents, from a year ago. But most of that increase ($5.7 million) came from an income tax benefit.

The profitability nevertheless gave the company confidence to spend a few bucks buying back shares. And investors apparently appreciated that.

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