Eggs and avocados are among the items experiencing inflationary pressure in Q1

First Watch Restaurant Group Inc. has seen traffic fluctuate this year, but it is working on marketing and to keep commodity costs in line, executives said this week.

Chris Tomasso, First Watch president and CEO, said on the daytime café’s earnings call for the first quarter ended March 30, that the brand had positive traffic in January but it declined in February and returned to positive in March. The Bradenton, Fla.-based company said same store traffic was down 0.7% overall in the first quarter.

“Then in April, we posted the best monthly same-restaurant traffic result in over two years, giving us optimism that we’re on track to achieve positive traffic for the year,” Tomasso said.

Tomasso noted that initiatives to drive traffic were working especially well in the third-party delivery channels.

The company was also improving its ticket times, Tomasso said, and that remains an important key performance indicator.

“Our investments in the development of our people and their well-being continue to pay dividends, fostering a highly motivated and skilled team as evidenced in part by our continued reduction of turnover rates,” Tomasso said.

He added that rising costs of goods were pressuring restaurant margins.

Mel Hope, First Watch’s chief financial officer, added that commodity inflation was 7.7% in the quarter, with higher prices for eggs, bacon, coffee, and avocados, “which comprise four of our top five food cost inputs.” He said the four categories “are all trading at remarkably high prices and so are increasing our commodity costs.”

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Labor inflation was 4.1% in the quarter, Hope said.

“Near-term, our margin profile is being pressured by higher inflationary headwinds in our market basket since our last earnings call, the impacts of new tariff implementation, and the incremental cost of the previously listed initiatives,” he said.

For the first quarter ended March 30, First Watch’s net loss was $829,000, or one cent a share, compared to net income of $7.2 million, or 12 cents a share, in the prior-year period. Revenues were $282.2 million compared to. $242.4 million in the same period a year ago.

Same-store sales were up 0.7% in the quarter, and same-store traffic was down 0.7%, the company said.

First Watch opened 13 new restaurants during the quarter, ending the period with 584 locations. The company in January opened its first New England location in Hanover, Mass.

Contact Ron Ruggless at Ronald.Ruggless@Informa.com

Source https://www.nrn.com/fast-casual/first-watch-battles-rising-commodity-costs-as-traffic-rebounds

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