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Steak N Shake...


Nnejad
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Hey I said:

 

Then again, if the company is earning $5-6M per quarter again by the AGM, I don't think too many people are going to care.  Most will realize how much work this turnaround really took and the amazingly short span of time he did it in.  Cheers!

 

And

 

I don't have a problem with Sardar's salary.  If the company is turning around as early progress is showing, paying him $900K a year would be a hell of a lot cheaper than any future bonuses the compensation committee could have granted him going forward.  I remember when Prem added the dividend, there was a huge outcry on the MSN Board over it.  That he was already getting $600K a year!  Today, everyone on this board would agree that Prem Watsa is significantly underpaid, dividend or not.

 

So, I don't have a problem with Biglari's salary, because I also agree with a previous comment that this guy is unreal.  I have alot of confidence in my own investment abilities, and the MPIC Fund I, LP has blown the lights out in such a tough period for the investment industry.  But the mix of investment ability, determination and entrepreneurship in Biglari is rare.  Something I can only dream of!

 

That being said, I would have preferred if the compensation committee had brought on the raise in a gradual fashion, along with improvements in the business.  For example, they could have doubled his salary this year with improved numbers, and then increased it to the same level they have now set it at if next year's numbers were also improving.  To spring a tripling of his salary on investors whose share price is still stuck below where Biglari himself even bought, was probably not a wise decision by the compensation committee.  Let's see where the numbers are at the AGM...with this guy, if he accepts this pay package, I would think it is probably because things are improving markedly.  Cheers!

 

Those numbers are friggin' amazing.  Mind-blowing actually.  McDonald's hasn't reported June's numbers yet, but Steak'n Shake's same store sales are superior to McDonalds U.S. April and May sales numbers...McDonald's! 

 

I still think the optics of the salary didn't look good, and that's not entirely Sardar's fault.  I put the blame primarily on the compensation committee.  They are there to use their judgement to decide what is fair compensation, as well as weighing that compensation against shareholder and public opinion.  They were correct on the first part, but missed on the second.  Cheers! 

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I sent Sardar another email:

 

Hi Sardar,

 

I'm guessing that those "pointed questions for the compensation committee" will be significantly less pointed at the next AGM.  Superb work this quarter...absolutely superb!

 

All the best,

 

 

Sanjeev Parsad

 

Corner Market Capital Corporation

Suite 1620, Box 36

1140 West Pender Street

Vancouver, BC  V6E4G1

 

Cheers!

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...are those traffic and sss numbers being compared with the previous quarter or the same fiscal quarter of last year???

They are a comparison with the same fiscal quarter of the previous year....and that's important here.  These comps are against a period when the business was in free fall and so by definition the Q in 2008 as a benchmark is an "easy comp" as they say.   Here's how the 10-Q described the situation for the Q ended July 2, 2008:

 

"Net sales decreased 6.2% from $152,700 to $143,303 in the current quarter primarily due to the decline in same store sales. Same store sales decreased 5.8% due to a decline in guest traffic of 8.5%".

 

wabuffo

 

 

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They are a comparison with the same fiscal quarter of the previous year....and that's important here.  These comps are against a period when the business was in free fall and so by definition the Q in 2008 as a benchmark is an "easy comp" as they say.

 

I think that is a bit of a cop-out...no offense.  The fact that same store sales increased, as well as customer traffic during the quarter, regardless of whether the business was in freefall or not is the relevant point. 

 

I think the same argument was used last quarter...that it was an easy comparison.  This is what SNS reported in the 2nd Q of 2008:

 

Fiscal Second Quarter 2008 Results

Total revenues for the fiscal 2008 second quarter decreased 5.8% to $190.5 million compared to $202.2 million in the comparable period last year. During the second quarter, same store sales declined by 6.3% versus a decline of 9.5% in the first quarter.

 

This is what you quoted from the 3rd Q 2008:

 

"Net sales decreased 6.2% from $152,700 to $143,303 in the current quarter primarily due to the decline in same store sales. Same store sales decreased 5.8% due to a decline in guest traffic of 8.5%".

 

Which is worse?  Same store sales had declined more in 2nd Q 2008 compared to 3rd Q 2008.  Steak'n Shake only improved their same store sales by 2.4% and customer traffic by 7.8% in the 2nd Q 2009 compared to 2nd Q 2008.  This quarter they've increased same store sales by 5.0% and customer traffic by 13.4%!  Extraordinary anyway you slice it! 

 

So far, they've handled every concern shareholders might have had regarding improvement of store operations.  The argument last October was that it was unlikely that Steak'n Shake would be even able to meet all the new tighter covenants added by their creditors, yet it looks like they'll meet them all.  Infact, I expect the company to be completely debt-free at this same time next year, simply by using excess cash flow and the disposal of some of the assets for sale. 

 

We've had less than one full year under new management and the entire operation has not only stabilized, but growth has finally returned to the business.  The only concern is cash flow from the business.  I'm quite certain that we are going to see a quarter that had very respectable growth in free cash flow. 

 

I watched Jim Cantalupo turn McDonald's around in a very short period...this is completely comparable to that event...the speed, the urgency, the results.  Obviously, one is like turning around a supertanker, while the other is an 80-foot yacht, but Steak'n Shake was also in a far more precarious position when Biglari took over.  At some point, it's ok to say that the circumstances have changed, and perhaps the outcome is different than what people originally expected.  Cheers!

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sorry if this is a stupid question guys but are those traffic and sss numbers being compared with the previous quarter or the same fiscal quarter of last year???  thanks

 

scotty, tho sss no.s are compared to the comparable qtr of the previous yr, it looks to me like sns also increased its sss by approx 4.5% qtr over qtr.

 

if you calculate an avg monthly per store sales no. for the qtrs you wish to compare, you can adjust for the fact that different qtrs sometimes have  a different no. of days. in sns's case, their 2009 Q1 had 16 weeks whereas their Q2 will have 12 weeks.

 

ignoring franchised vs co owned stores & any changes to the mix during the qtr, & also ignoring any closed or opened new stores (for instance, during the 2nd Q sns may have opened 5 new stores if you go to their website & count store locations- i counted 494 on 5-28-09-, but i cant be sure they update these regularly), i came up with an estimated 96k monthly sales per store in 09 Q1 & est'd 100k monthly per store for the upcoming Q2.

 

if anyone finds a mistake plz let me know!

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ignoring franchised vs co owned stores & any changes to the mix during the qtr, & also ignoring any closed or opened new stores

 

i mentioned possible new store openings during the qtr, but ofcourse these dont figure in sss no.s anyways. but they will impact total qtrs sales.

 

btw, i found this news blurb on sonic intersting:

 

http://money.cnn.com/news/newsfeeds/articles/djf500/200907071247DOWJONESDJONLINE000457_FORTUNE5.htm

 

snip:

<<Sonic sees big potential in new markets, where stores generate $2 million in sales during their first year, 60% higher than Sonics that open in an existing markets. The company plans to be in 164 markets at the end of this fiscal year, up from 117 in 2004. Some analysts see the store base doubling from its current count of about 3,500 with hundreds of stores in states from Washington to Massachusetts...While Sonic's novelty will wane, stores in areas like the Northeast should see sales settle above the system average of $1.1 million, due to density and income levels. Later this year, Sonic expects to open its first location in Massachusetts.>>

 

 

 

 

 

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