Benihana Shares Dip on Downgrade

NEW YORK (AP) -- Shares of Benihana Inc., which operates a chain of Japanese-themed and sushi restaurants, fell Friday after a KeyBanc Capital Markets analyst cut her rating because of expected higher infrastructure spending.

Analyst Lynne Collier downgraded the shares to "Buy" from "Aggressive Buy," noting that the company's general and administrative costs contributed to a fiscal first-quarter earnings miss.

She said the situation is likely to repeat itself in the future as Benihana continues to remodel existing restaurants and open new ones.

Collier said the higher costs are due to the company's need to add infrastructure to support the remodels and new restaurants.

"We believe that the company is positioning itself for success over the long term, as the company materially accelerates unit growth over the next 12 to 18 months," she said in a note to investors.

Collier said she anticipates a total of 17 completed remodels by the end of the 2008 fiscal year with another seven completed in the 2009 fiscal year. The Miami-based company operates about 80 restaurants nationwide.

In addition, she said there are 17 restaurant sites under development for all three brands. That represents unit growth of about 20 percent, she said.

"This is a material uptick versus previous years," Collier added.

The accelerated pace, though, led her to lower her earnings estimates for both 2008 and 2009 to factor in the higher infrastructure expenses and increased depreciation costs from the remodels. Collier lowered her 2008 estimate by 11 cents per share to 84 cents per share and cut her 2009 earnings estimate by 9 cents per share to $1.

Analysts polled by Thomson Financial on average expect 2008 earnings of 96 cents per share and 2009 earnings of $1.18 per share.

Benihana shares fell 41 cents to $17.38 in late morning trading.