O’Charley’s walks the fine value line

By Geert De Lombaerde Posted on October 29, 2009 at 2:28 pm

Jeff Warne, the CEO of O’Charley’s, this morning told investors and analysts that, in trying to drive traffic to his restaurants, his crew isn’t interested in deeply discounting the meals it offers now. Doing that instead of coming up with new offerings, he said, is simply “transferring value to the guest somewhat at the expense of the shareholder.”

“We’re trying to find the right balance between profitability and driving guests. It’s clear that value is the dominant message and we’re trying to do it in a profitable way.”

On what was otherwise a rather tame call – as is often the case when expectations are met – one moment of suspense came from Morgan Keegan analyst Robert Derrington, who pressed CFO Larry Hyatt on why the company wasn’t raising guidance for the full year when it beat its own third-quarter estimate. In keeping guidance flat, Derrington wondered, was the company implying that business is going to get worse?

Not quite, said Hyatt. But the consumer spending picture is very murky and the fourth quarter is generally on the slow side, so sticking your neck out on guidance just doesn’t make sense, especially when operating costs are pretty much fixed at this point.

“The fundamental question is sales. We don’t have any more visibility into fourth-quarter sales than we suspect anyone else does.”

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Tags: consumer spending, earnings estimates, earnings reports, Jeffrey D. Warne, Lawrence E. Hyatt, Morgan Keegan & Co. Inc., O'Charley's Inc., restaurants, Robert Derrington