Chipotle Mexican Grill Inc , Buffalo Wild Wings Inc and BJ's Restaurants Inc dashed high hopes that 2010 would be the year that the mid-tier restaurant industry makes a comeback.
Shares in the sector tumbled in after-hours trade as some of the sector's best-performing chains missed elevated Street expectations.
A 12.6 percent drop in Buffalo Wild Wings shares led the fall. Shares in Chipotle were down 3.9 percent.
Prior to Thursday's financial reports, shares in Buffalo Wild Wings and Chipotle had posted year-to-date gains of around 20 percent and 15 percent, respectively.
Expectations were high and these were some of the stocks that had the highest expectations attached, RBC Capital Markets analyst Larry Miller told Reuters.
Several of the companies had previously said that their final quarterly reports from 2009 would top Wall Street forecasts. That fueled optimism because restaurant stocks traditionally have been a leading indicator of improved consumer sentiment and economic recovery.
But to further impress investors, restaurant operators had to issue stellar results, show improving same-store sales trends and boost guidance to a level that satisfied the Street, Miller said.
That's a tough needle to thread, he said.
BJ's, a brewery and restaurant, said it does it not expect consumer spending in restaurants to recover in 2010 and its shares shed 3.6 percent in extended trade.
Stronger gift card redemptions pushed the chain's same-store sales up 1 percent to 2 percent during the first five weeks of the first quarter, but BJ's executives said such gains were not sustainable.
We don't expect to see meaningful and sustainable increases in our guest traffic and comparable sales metrics until the overall job market begins to improve in our country, a company executive said on a conference call.
Buffalo Wild Wings in October said same-store sales were up 6 percent for the first four weeks of the fourth quarter, but by the end of the selling period, sales at established restaurants were up a far more modest 2.6 percent.
The sports-oriented chain's fourth-quarter profit growth also lagged Wall Street's expectations. Shares in Buffalo Wild Wings fell to $42.29 in extended trade from their Nasdaq close of $48.40.
Upscale burrito seller Chipotle disappointed investors by repeating its forecast for flat 2010 same-restaurant sales, despite a surprise 2 percent gain in sales at established restaurants in the latest quarter.
Panera , which is known for its indulgent sandwiches and baked goods, has been reporting some of the industry's strongest same-store sales growth.
It reported a 7.4 percent jump in fourth-quarter sales at established company owned units and raised its forecast for 2010 earnings, but that full-year profit view still fell short of analysts' average estimate and shares fell 2.9 percent.
(Additional reporting by Vidya Lakshmi and Renju Jose in Bangalore; editing by Gunna Dickson, Phil Berlowitz)