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Schlotzsky's, Inc. (BUNZQ) Message Board

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  • kknauber kknauber Aug 20, 1999 7:55 PM Flag

    Please Stop!

    BUNZ still has better fundamentals than most
    companies in the restaurant business. Just did a quick
    survey in the industry of things like debt/equity ratio
    and profit margin. BUNZ looks great in these areas.
    Many other restaurant companies are mired in serious
    debt. BUNZ is not. There is absolutely no comparison to
    Boston Chicken.

    The street doesn't like it right
    now because BUNZ is changing its concept, and it has
    not yet proven that the new concept works.
    The
    last quarter, BUNZ forced some of its franchisees to
    close shop because their stores were dirty, run-down
    and ugly. Plus those stores weren't making much money
    anyway. As far as I'm concerned, this is not a bad a
    thing.

    Some of the new stores I have seen have REALLY
    impressed me. One store in Dallas has 3 cash registers
    running at the front of the store, plus a drive through,
    plus cash register for phone-in orders. And all of
    them run full tilt at lunchtime. That's 5 times as
    many cash registers as an old-style store in a
    strip-center with only one cash register.

    Schlotsky's
    just has to prove that this concept works, and from
    what I have seen with my own eyes, it is working
    great. The street is nervous because the street doesn't
    like to see change without proof that the change
    works. This past quarter we saw some charges on the
    balance sheet that reflected the cost of going through
    this change, and the street has reacted
    badly.

    What I see is a company with great product, great
    fundamentals, and decent though not spectacular growth, and I
    see Wall Street analysts running away from the
    company. Now is the time to buy.

    Sure, the new
    stores are expensive, thats the main complaint right
    now. But what you end up with is a restaurant more
    like a Chili's and less like Al's Grease Burger Shack.
    Schlotsky's image is very important. If you are going to pay
    $4.50 for a great sandwich vs. $2.50 for a grease
    burger, your store better be clean and good looking.

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    • I haven't done an industry survey so I'll take
      your word that despite massive balance sheet
      deterioration BUNZ is still better off than many
      restauranteurs. Investors don't care much about numerical
      snapshots, though, they care about the future. They tend to
      predict the future by extrapolating trends. BUNZ's trends
      are all bad.

      If investors have tremendous
      confidence in management or some expectation of a change in
      the business cycle they'll sometimes buy into the
      idea that the trend is about to reverse. Neither
      applies to BUNZ.

      Schlotzky's must do more than
      prove that the new stores work. They must prove they
      can operate and grow their franchise in a cash
      efficient manner. There was a time when they were doing it.
      The last 18 months they have not. If you see any
      evidence they are back on the right track I'd be delighted
      to see it. I'd like nothing more than a good reason
      to load up on the stock (or simply take it private).

      • 1 Reply to doggydogworld
      • What is happening to Bunz stock? Very simple. At
        this point in time, investors are saying this is the
        price they will pay for the stock and owners are
        willing to sell at this price. Why is this? Well, the
        stock market is tough right now for small companies
        that don't get as much hype or exposure as bigger more
        share liquid companies. So companies like Bunz are very
        dependent on brokerage firms like Raymond James, etc. to
        strongly recommend them to their customers, which they did
        at first and some are still doing. However, if you
        have been watching Yahoo's research page on Bunz you
        see that in the last 30 days earnings estimates have
        been coming down. This is reflective of the brokerage
        companies hearing what Bunz management is saying in the
        conference calls and probably with private discussions with
        management and what they are doing with the company. I don't
        know if others noticed, but when Bunz was saying they
        were only off 2nd qtr eps estimates by $.01, it was
        because, according to Yahoo, the analysts had already
        reduced eps estimates for that quarter. In other words,
        it appears that they have been guiding analysts to
        lower estimates. This is not good for the stock. If you
        look at estimates on Yahoo now they show consensus eps
        estimates for the fourth qtr to be an increase of only
        5.8%. If correct, that is a far cry from the 20+% eps
        growth they have had in the past.