BJ's Restaurants 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, everyone, welcome to our fiscal year 2026 second quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2026 second quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President, followed by Todd Wilson, our Chief Financial Officer. After which, we will take your questions. With that, I will turn the call over to Lyle.

Lyle? Good afternoon, everyone, thank you for joining us to discuss our Q2 financial results, operating performance, and outlook.

Q2, or celebration season, as we call it, was another very strong quarter for BJ's. It was energizing from a performance standpoint, reinforcing our relevance in the social splurge occasion I have talked about, and meaningful from an organizational perspective. Q2 represented our eighth consecutive quarter of sales and traffic growth and our seventh consecutive quarter of profit growth. Same-store sales increased 6.5%, driven by 8.3% traffic growth, continuing to significantly outperform Black Box casual dining benchmarks. On the profit side, restaurant-level operating margins expanded roughly 20 basis points to 17.2%, inclusive of roughly 5% of food inflation, which impacted cost of sales by 120 basis points.

Adjusted EBITDA margins were up roughly $2.3 million at 11.4%, inclusive of roughly 40 basis points of deferred comp expense, which Todd will address in his remarks. A few notable Q2 highlights. Our operators delivered outstanding performance. Mother's Day and Father's Day were up over 8% and 3% year-over-year respectively, and more than 80 restaurants broke daily or weekly sales records, all while continuing to improve guest metrics. A strong reinforcement of our ability to win across multiple occasions. Our marketing plan continues to work effectively and efficiently. As I have previously shared, I shifted marketing dollars from Q1 into Q2 to optimize spend timing and drive the highest returns.

For the first half overall, we invested the same dollars, but we are about 20 basis points more efficient as a percentage of sales versus last year, while delivering an increase of 67% in impressions in Q2 and 146% in the first half overall, supporting our strong sales. The results continue to reflect the progress our marketing and culinary teams are making, aligning product, messaging, and go-to-market strategies. Our Biscoff seasonal Pizookie was a hit, doubling Pizookie incidents year-over-year during the quarter, and we saw growth across all geographies, all day parts, and all channels. On check and mix, there are a few key points I think are worth calling out. The majority of compression came from Tuesday and Friday. Tuesday is driven by an iconic promotion that builds acquisition and ritual amongst hard-to-reach younger guests.

Friday is when the Pizookie Meal Deal has opened the social splurge occasion to more people, driving both new guests and repeat visits. Importantly, our sales growth is relatively evenly split between all of the weekdays and the weekend days. We are not overly reliant on any one day or promotion, and our value proposition is resonating across the week. As I mentioned last quarter, as we move further through the menu renovation and continue to optimize programming, we expect more balance between traffic and mix, which we started to see in Q1. What we cannot fully plan for is when a product, like the Biscoff Pizookie, hits a cultural nerve and drives extraordinary trial. Thankfully, our marketing and culinary teams have a pretty impressive hit rate and have built a strong pipeline going forward. Ultimately, the key point is that we are driving profitable traffic.

Even with 120 basis points of cost of sales headwinds driven by food inflation, we grew total dollars and expanded restaurant-level cash flow margins. From an organizational perspective, Q2 was a meaningful quarter. We hired Monika Saxena, who came to us most recently from LongHorn Steakhouse, as our Brand President. Monika's track record of delivering sustainable long-term results through clear brand positioning, a relentless focus on product quality and guest experience, and her ability to build high-performing teams makes her an ideal addition to our leadership team. We also recently brought in Birju Amin as our new Chief Technology Officer, coming most recently from Yum! Brands, where he led restaurant technology for Taco Bell. These hires, along with the other leadership team changes over the past 18 months, reflect our commitment to unlocking the full potential of BJ's as we enter our next phase of growth.

I'm confident their perspectives, combined with the strong existing team and tenure we have at BJ's, will help us continue to drive long-term value for our shareholders. Overall, I'm very pleased with our Q2 and first half results and encouraged by the positive momentum we've carried into Q3, including sustained significant outperformance versus Black Box casual dining benchmarks. Looking ahead, we have a deeper understanding of our business and our consumer. We've identified our core growth drivers and are clear on the levers to pull in both the short and longer term. Our strategy remains centered on ensuring our people, our food, and our atmosphere work in concert to make BJ's the brand of choice. Everything starts with our team members. They're the ones who bring our brand promise to life, and we're committed to ensuring they have the tools they need to deliver for our guests every day.

That means continuing to invest in our training, embedding the new team member and manager programs we rolled earlier this year, building one BJ's way consistently across our restaurants, and developing our leadership pipeline to support future growth. It also means making our team members' jobs easier. Through continued work on POS simplification and modernization, tablet upgrades, and tech enablement, like our AI-supported activity-based labor model, which we'll continue to expand through year-end, our priorities are informed by listening to our teams and investing in the tools they need to deliver. These investments are reflected in our consistent guest metric improvements, continued reduction in comp food and beverage, team member and manager retention outpacing casual dining benchmarks, and ultimately, in our sales and profit performance. On the menu front, we feel good about the progress we're making and will continue taking a disciplined category management approach.

We will focus on leveraging the chicken sandwich and burger category refreshes through Q3 while advancing other key category and item work across the menu. Our 3 culinary pillars of Pizookies, the Pizookie Meal Deal, and product news drive our culinary calendar, and we continue to optimize for more balance between traffic and mix. We have a strong Pizookie lineup for Q3, anchored in perennial favorites S'mores and Spooky, and we'll be bringing some new flavor innovation for holiday while continually building our pipeline to drive buzz and engagement. The Pizookie Meal Deal continues to resonate, driving both new customer acquisition and repeat visits. As I mentioned last quarter, we're testing potential evolutions, including a premium tier.

The test is providing great learnings, but it's still in its early stages as we explore ways to give guests pathways to trade up while reinforcing 2 core BJ's equities, variety and the Pizookie. On the product news side, I remain pleased with the category work we have done to date, and I'm excited about what lies ahead. Across pizza, burgers, and chicken sandwiches, each renovated category is driving higher incidents, more sales, higher average price, and higher dollar margin than before, inclusive of over $1.5 million of investments we've made back into product quality, particularly with pizza. As we continue progressing across the menu, I expect us to deliver a more craveable, compelling, consistent, and profitable offering over time. Ensuring the atmosphere of our 219 existing restaurants remains a competitive advantage is another key focus.