P.F. Chang’s aims to stem sliding sales
P.F. Chang’s China Bistro Inc. continued to see same-store sales slide at its namesake casual-dining chain and fast-casual Pei Wei chain in the fourth quarter, but executives said Thursday in a call discussing quarterly earnings that they have initiatives in place to stem declining traffic.
Plans include a new “Triple Dragon” initiative at the P.F. Chang’s chain to launch April 2 systemwide, the April opening of a new lower-priced “Asian Market” extension of the Pei Wei Asian Diner brand in Phoenix and continued expansion of both brands internationally.
The company’s initiatives to increase sales and grow traffic at the 204-unit P.F. Chang’s were “focused on enhancements to our price-value proposition in four core areas: menu innovation, improved service, lower-priced dining options and the reimaging of our restaurants,” P.F. Chang’s chairman and chief executive Rick Federico said in a call with analysts.
Many of the ideas for the makeover came from changes at a reimaged unit in Irvine, Calif., and in market tests at locations in the Arizona and Dallas–Fort Worth markets, he said. The lunch test featured smaller-portion versions of P.F. Chang’s 20 most popular menu items with soup or salad for less than $10.
“So far, these menu items have been extremely popular, and we’ve seen a steady increase in traffic,” Federico said. Lunch traffic was up as much as 20 percent since marketing efforts began, he added.
Dubbed the “Triple Dragon” initiative, the strategy blends “the new lunch menu, some of the best items from our innovation bistro menu, new music and a new look for our service team,” Federico said.
The menu includes more small-plate offerings; more salads, such as the popular Thai Chicken Noodle and Vietnamese Crab; and more wok-cooked items. Customers have also expressed an interest in sushi and expanded vegetarian items, he said.
While the 173-unit Pei Wei Asian Diner brand added on Oct. 10 its new value-oriented “Diner Selects” menu, featuring smaller portions of five signature Pei Wei entrées with rice and a choice of soup, slaw or spring roll starting at $6.25, the new Asian Market in Phoenix will be even faster and cheaper, Federico said.
The Asian Market aims to address both price and service speed, and offer the company more real estate flexibility. The Market is 2,500 square feet versus the current 3,200 square feet in traditional Pei Wei format.
“We’ll also have the flexibility to provide more seating for single and individual diners,” Federico said.
The Asian Market will offer more menu items at lower price points, more items in smaller portions and more portable options.
“The Market will be more affordable, with small plates starting at $1.95 and featuring some of Pei Wei’s current favorite menu items for $5.95,” he said.
Executives expect the Asian Market to have higher operating margins.
The market will be in test over the next year, and three or four of the expected 16 to 20 new Pei Wei locations in 2012 will be in the market format, Federico said.
P.F. Chang’s China Bistro Inc. reported Thursday that net income in the fourth quarter ended Jan. 1 fell to $4.1 million, or 19 cents a share, on special adjustments, from $14.7 million, or 64 cents a share, in the same quarter last year. Revenue fell to $309.8 million in the quarter, from $311.2 million in the prior-year period.
Declining guest traffic in the quarter led to same-store sales decreases of 2.4 percent at the P.F. Chang’s chain and 1.9 percent at Pei Wei.
“While we were not satisfied with our earnings in the fourth quarter, we were pleased with our progress on the top line. We remain confident in the direction of recent initiatives to restore positive sales momentum, which have shown encouraging early signs in the first half of our first fiscal quarter,” Federico said in a statement.