Sardar Biglari continues in his attempt to be like Warren Buffett. In his 2009 Chairman’s letter, released last night, he does his best Buffett emulation, writing about the business, dropping names of mangers, throwing in witty comments, stressing long term over short term performance, etc.
Like Buffett gives shareholders a discount on GEICO auto insurance (which I’ve never found to be anywhere near reasonably priced, but I guess that’s why they make so much money), Sardar is giving SNS owners coupons for free shakes with their annual reports. Don’t worry, Sardar hasn’t suddenly become charitable since turning 32 and becoming a father; he’s just trying to drive traffic to Steak ‘n Shake restaurants. He says that if each restaurant can serve 20 more customers per day, or get $130 more in sales per day, it would be $20m more in revenue, and with low marginal cost due to leverage, almost all of this would be free cash flow to the business.
It’s this type of heavy promotion that has driven Steak ‘n Shake’s traffic to be up 20% in the September quarter (I’ll admit to going there three times in the quarter vs only once last year!!). While same store sales growth was not as strong at only 10.1%, it’s still 10.1% growth during a recession. And even against “easy compares,” as the analysts say, it’s still pretty impressive.
The final piece of news is that he is implementing a 20-1 reverse split of the stock, which will make the price about $240 per share. While this means nothing in the short term, it will have the effect of being a small share repurchase, and hopefully, according to Sardar, “attract knowledgeable long-term owners” of the stock.
Disclosure: Long SNS, BRK/B.Please see full disclaimer.
Tags: Steak n Shake
