COSI Conference Call Notes 5/14/2015

Some notes from the call: 

• Refreshes will be completed by 2016 Q1.
• 3 components to refreshes: Physical, efficiencies, Hearthstone leverage.
• Early indication...double digit comp growth after a full refresh.
• Hearthstone merger will contribute $2.4mm in incremental cash flow to COSI in 2015.
• They will remodel 55 of the 64 stores.
• Cash flow + target in Q4 2014 intact.
• Fully diluted # shares 47.805399mm shares.
• No more capital raise needed.
• Menu refresh should be complete by end of May. 
• Menu count should drop by 25%.
• From that base they will experiment with new additions and substractions.
• New entrants into fast casual space not causing real concerns because fast casual is such a small piece of the overall pie however it makes acquiring real estate much harder.
• Both traffic and average check size increased in the first quarter.
• All three cost categories (food, labor, and occupancy) went up in the first quarter.  This is disappointing.  We have written about the need to cut labor and occupancy costs, and we are looking for signs that these costs are turning.  RJ indicated that this is happening in Q2.
• RJ is getting things in place that have been long neglected: Management team, technology.

Of interest: Cosi Investment Thesis

Jennifer Galperin. Follow me on Twitter and Stocktwits.

Michael Bigger. Follow me on Twitter and StockTwits.