Things were starting to look up for BJ’s Restaurants in November. Same-store sales turned positive and were growing week after week. Staffing levels were up. Dining room sales were creeping closer to pre-pandemic levels. It had restored its full menu after earlier cutbacks. Its late-night business was starting to resemble 2019’s again.
Then, in mid-December, omicron hit, and everything fell apart. An "unprecedented" number of BJ’s workers caught COVID—6 times more than during previous spikes. Many of its 211 restaurants had to limit their hours and menus as a result. Average weekly sales plummeted, and that growth from November turned negative. Heavy rain in California, where more than a quarter of BJ's are located, only added to the headwinds.
“It really took a turn—a 180-degree turn,” CEO Greg Levin said on the chain’s fourth quarter earnings call Thursday.
Ultimately, BJ's same-store sales for the period ended Dec. 28 fell 1.1% compared to the 2019 period. The chain’s struggles continued into January as omicron spread. Average weekly sales dropped to $96,000 for a same-store sales decline of 9% on a two-year basis that month.
But things have improved almost as quickly as they soured. Average weekly sales have rebounded to $106,000 in February, reaching $116,000 during the week of the Super Bowl and Valentine’s Day, executives said. Excluding weather impacts and the timing of President’s Day, same-store sales are positive for the month.
The ups and downs demonstrate the strong correlation between COVID-19 cases and restaurant sales. BJ’s difficult two months were part of an overall slowdown for the industry, which has seen monthly sales fall three out of the past four months.
And BJ’s is encouraged by the more normal, predictable environment it has experienced in February so far. Going forward, executives said, its growth will continue to hinge on staffing, which will allow it to serve more guests on-site.
The chain is making “great strides” in that department, Levin said, though its workforce is still smaller than it was before the pandemic.
“More people [are] applying for jobs, showing up for jobs and building the team member ranks at BJ's,” he said. “I do see our levels returning back to pre-COVID levels.”
Off-premise, meanwhile, has been a persistent bright spot, with sales standing at double their pre-pandemic levels.
“On-premise is certainly the opportunity, and it's great to see these sales on off-premise staying where they are,” said CFO Thomas Houdek. “So when we get restaffed and able to build that traffic back up, we've got a lot of opportunity there.”
The cost of hiring and training new workers, combined with commodity inflation and lower sales, has taken a bite out of BJ's restaurant operating margins. They were 10.1% in Q4 and are expected to remain there for the first quarter. But executives believe margins will exit the year in the mid-teens as sales improve. It’s also raising prices about 3.5% to help offset the higher costs.
That hike is lower than some of its casual-dining peers and restaurant price inflation at large, but BJ’s hopes the conservative approach will help drive traffic, particularly during lunch and late-night, which were hit the hardest during the omicron wave.
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