Kona Grill's Strategic Expansion

Zacks

Scottsdale, Arizona-based restaurant chain Kona Grill Inc. (KONA) recently inked a lease agreement for 6,649 square feet of space at The Village at Meridian in Boise, Idaho. This is done with the clear intent of opening a new restaurant in the region to capture its emerging opportunities. Financial terms of the agreement have not been disclosed.

The Village at Meridian is considered as one of the most important commercial projects developed in the state of Idaho. The first phase of the lifestyle development project will occupy nearly 500,000 square feet of space for retail, entertainment, restaurant and office. It is slated to open in the fourth quarter of 2013.

Kona Grill chose this particular space as this area is strategically positioned in the heavily populated and lucrative area of Boise. The opening of the restaurant is likely to generate employment for 100 people.

The opening of the new restaurant underscores the company’s intention to expand its business across several locations; which will eventually lead Kona Grill to achieve its long-term goal of boosting its growth.

Kona Grill owns and operates 23 high-end casual dining restaurants across 16 states in the United States. In third quarter 2012, Kona Grill missed Zacks Consensus Estimates on both lines and witnessed a slowdown in sales. However, bottom line improved year over year due to the company’s efficient cost control measures.

The company had entered the third quarter by exercising a 1.1% pricing on new menus after 14 months. Despite this price rise, the company has failed to improve their revenues in the reported quarter owing to the uncertain economy.

Kona Grill, which competes with the likes of Jamba Inc. (JMBA) and BJ’s Restaurants Inc. (BJRI), currently retains a Zacks #3 Rank (Hold). We currently have a long-term ‘Neutral’ recommendation for the company.

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