California Pizza Kitchen (CPKI) - Bear Of The Day

We expect California Pizza Kitchen, Inc. (CPKI) to continue to suffer declining traffic, de-leverage of its rent expense, and face shrinking ROEs well into 2H09.

However, we expect CPKI to rebuild momentum in 2010 (primarily through unit growth), grow earnings at a mid-teens average rate over the next five years by adding full service restaurants in existing and new markets (at a rate of about 8%-10% annually), increase comps (we estimate +3% beginning in 2010) and restaurant margins through its new prototype restaurant design, repurchase shares, and build its lucrative Kraft frozen pizza licensing business.

Nevertheless, we expect earnings to deteriorate for at least two quarters with renewed growth dependent on the economy, to which there is no visibility.

Subscribe by RSS Subscribe by Email