Out Fox The $treet

Kona Grill (KONA) reported much improved numbers for Q1 this morning. Revenue of $21.1M easily surpassed analyst estimates of $19.4M and the companies guidance of $19.4M to $20.4M. Considering the stock had risen from the $3 range to $4.35 it was apparent that analysts/investors were expecting this beat. As usual, analyst estimates basically went along with guidance even though it was obvious that the market had turned and middle to upper end restaurants should do much better this year. It was encouraging to see that March comps were positive marking the first time in over 2 years of positive monthly comps. Most retailers had strong March numbers so this really isn't anything special from KONA, but a good sign nevertheless. It'll be interesting to see how they line up with the industry on comps for March. The new CEO clearly came on board at the right time. Management always looks brilliant in a good economy. The verdict is still very much out, but at the very least they are no...

Not a huge surprise to see a new CEO buy into his new company. Especially a company seen as very undervalued if a turnaround takes place. It's only 22.5K shares at a little over $65K. Whats really intriguing though is to see 75K shares traded on a Friday which happens to be the highest volume since mid June. We'll see in a few days whether is was one of the Private Equity groups adding shares now that they have a more friendly CEO and BOD. The really odd part is that the trades went off without pushing the stock up. Insiders were basically the only ones on the bid the last week or so and yet it didn't drive the price up. Hmm... Keep an eye on this next week.

Kona Grill (KONA) has long been a favorite concept of Stone Fox Capital with its blend of sushi with western foods, but it clearly lost its way over the last couple of years due to questionable management. Last Monday, KONA announced a new CEO plus a new BOD member. Positive signs that they've finally got quality management on board to turn the concept around. KONA was always criticized for being run by a hedge fund manager instead of an industry expert. Now we'll see. Mr. Buehler was the Chief Executive Officer of LS Management, Inc., the owner and operator of the Lone Star Steakhouse & Saloon/Texas Land and Cattle Steak House restaurant concepts, as well as Lone Star Business Solutions, an external accounting, IT and HR provider, where he served from July 2007 to May 2009. Lone Star Steakhouse & Saloon consists of 141 company restaurants, 5 domestic franchise restaurants, and 10 international franchise restaurants, while Texas Land and Cattle Steak House consists of ...

Now that the CEO that has successfully run this promising restaurant concept into the ground, Stone Fox Capital is ready to review a potentially larger position in this concept. Kona Grill (KONA) just opened its 22nd restaurant in Woodbridge, NJ. KONA has longed seemed a promising concept with its modern blend of an American grill with a sushi bar. They've been public for a few years now and they've largely been off the radar of Wall Street though they've had fast store growth and for a while strong comps. Lately the comps have fallen off the wagon posting -9.6% (yes thats negative) which was horrible considering that some of the competition actually posted positive numbers. KONA is definitely on the slightly upper end of casual dining so its not too surprising that they posted weak results but those results were jaw dropping. Mill Road Capital claims in the Q1 Conference Call (see SeekingAlpha transcript ) that KONA had the worst comps in the 15 company universe they follo...

Finally! Everybody has wanted the CEO gone for the last 1-2 years since Kona Grill (KONA) began underperforming. Whether this opens up KONA for a takeover by Mills Road (they offered $10 last year) or not will be seen soon enough, but it definitely can't hurt the performance of the company. KONA has a great concept, but bad management. Its yet to be seen whether this will turn change management b/c presumably the left overs are Jundt players. The new COO was hired by Jundt so while I'm much more bullish I'm still hesitant. More later on KONA as the story develops.....