Shares of Ark Restaurants Corp. (ARKR Quick QuoteARKR - Free Report) have lost 20.3% since the company reported earnings for the quarter ended Sept. 28, 2024. This compares unfavorably with the S&P 500 Index’s 2.9% decline over the same time frame. Over the past month, the stock has moved up 6.3% versus the S&P 500’s 0.4% fall.

For the fourth quarter of fiscal 2024, Ark Restaurants reported total revenues of $43.4 million, down 2.2% from $44.4 million in the year-ago quarter. The company incurred a net loss of $4.5 million, or $1.24 per share compared with a net loss of $10.4 million, or $2.88 per share, in the prior-year quarter. Adjusted EBITDA for the quarter was $0.5 million, a decrease of 14% from $0.6 million in the year-ago period.

For the full fiscal year, revenues declined 0.7% to $183.5 million from $184.8 million, while the net loss narrowed to $3.9 million, or $1.08 per share, from a loss of $5.9 million, or $1.65 per share, in fiscal 2023. Adjusted EBITDA for the full fiscal year was $6.1 million, down 33.9% from $9.3 million in the year-ago period.

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Other Key Business Metrics

Same-store sales fell 3.6% during the quarter and 1.1% for the fiscal year, reflecting a challenging operating environment. Segment-wise, the Florida and Washington, DC, markets underperformed, while Alabama exhibited steady performance. The Las Vegas segment delivered satisfactory revenue levels, though profitability was pressured by payroll increases.

Operational costs remained a concern. Food and beverage costs and payroll expenses experienced a slight decrease in the quarter, yet these reductions were offset by higher occupancy expenses and general and administrative expenses. Key non-cash write-offs included a $4 million goodwill impairment and losses associated with the closure of El Rio Grande, totaling $0.9 million.

Management Commentary and Influencing Factors

Management acknowledged that labor and insurance costs remain elevated but have stabilized recently. However, the company’s reluctance to raise menu prices significantly, especially in light of soft demand, continues to constrain margins. Revenue challenges were further attributed to sluggish customer traffic in certain markets, including Florida and Washington, DC.

CEO Michael Weinstein highlighted ongoing efforts to refine operations and explore new growth opportunities. The company has been monitoring the performance of its new Asian dining concept, "Lucky Pig," which it plans to expand if initial results prove favorable. Additionally, management expressed optimism about opportunities tied to potential casino developments in New Jersey, though these remain speculative at this stage.

Guidance and Focus for Future

The company did not provide formal guidance for fiscal 2025 but indicated that it will focus on improving efficiency in existing operations and testing scalable dining concepts. Management is also actively lobbying for potential casino-related opportunities in the Meadowlands, which could unlock long-term growth.

Other Developments

Ark Restaurants reached an agreement to terminate its lease for the Tampa food court at the Hard Rock Hotel and Casino, receiving a $5.5 million termination payment. This decision was driven by the landlord’s intent to repurpose the space. The company expects a net gain from this transaction after distributing 35% of the proceeds to outside investors in the associated subsidiary.

Additionally, Ark Restaurants continues negotiating extensions for its Bryant Park locations in New York City, though management disclosed that the landlord has expressed interest in selecting another operator. The company has engaged external advisors to ensure a fair process in its bid to retain these key locations.