Pizza Inn recently launched a rebranding and focuses on the dinner consumer. / Image courtesy of Rave Restaurant Group.
Wall Street loves its share buybacks.
The Rave Restaurant Group, owner of pizza chains Pie Five and Pizza Inn, noted Friday that it acquired $ 500,000 worth of stock last quarter and another $ 1.1 million since then, the first time in a decade that the company has taken 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 stock price, which rose 15% in morning trading and now rose 30% for the full year.
To be sure, the shares are trading at less than $ 1.50 per share even after the rise, and such low-holding shares are subject to wild price swings. Yet a day has come when the Russell 2000 stock index fell more than 2%, ending a bad week for equities on a decidedly negative note.
“After nine consecutive quarters of profitability, we are moving from a turnaround to a stable company ready for growth,” said CEO Brandon Solano in a statement.
Rave’s two brands had struggled to enter the pandemic, most notably its Fast-casual brand Pie Five, which was closing locations and seeing a drop in sales. Both brands appear to be stable now and are increasingly focused on the die-in consumer.
At the Pizza Inn, same-store sales increased 13.5 percent in the company’s fiscal fourth quarter. On a three-year basis, same-store sales increased 13%, based on Restaurant Business calculations. To be sure, the company’s unit count has dropped 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 consumer at dinner. “As the restaurant industry moves away from dine-in, we continue to lean on our differentiated strategy, focusing on the value and variety of the Pizza Inn buffet, opportunistically capturing delivery and takeout,” he said.
At Pie Five, the story is more complex. The fast-casual pizza chain is less than half the size of 2018, with just 31 locations. Sales at the same store remain down 1.5% on a three-year basis, and the chain’s sales also declined during the pandemic.
The brand is making a large investment in its menu, with plans to ditch the large cakes it hoped the group’s customers would bring. Like Pizza Inn, the brand focuses on the indoor-eating consumers who were the bread and butter of the fast-casual brand in its early days. The company is focused on “operational and hospitality improvements” in its franchised restaurants.
That said, Rave’s revenues increased 19% to $ 2.8 million for the quarter. Net income was $ 6.8 million, or 38 cents per share, far above the $ 926,000, or 5 cents, of a year ago. But most of that increase ($ 5.7 million) came from an income tax benefit.
The profitability, however, gave the company the confidence to spend a few dollars to buy back stock. And apparently investors liked it.
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