The last I left the ever-mysterious, controversial, and often confounding Biglari Holdings (BH) , (BH.A) , the company had just put up some decent first quarter results and had ended speculation as to the plight of its Steak 'n Shake business. BH paid off the debt of the fast-food chain, which struggled in recent years, putting an end to theories that it would let Steak 'n Shake go bankrupt.
Last week the company released second quarter results, which revealed earnings pf $71.7 million, and earnings per share of $223.29 per Class A share ($44.06 per class B share). Earnings were driven by investment gains of $84.8 million, which dwarfed results from the company's operating businesses. However, it appeared that Steak 'n Shake has improved, with EBIT (earnings before interest and taxes) of $5.5 million versus a $6.6 million loss for the same quarter last year. Franchise partner fees more than doubled to $7.9 million.
Two years ago the company closed many underperforming restaurants, and adopted a new strategy that involved selling Steak 'n Shake franchises to "qualified" franchisees for $10,000, plus up to 15% of revenue and 50% of store profits. At the time I, thought this was a risky strategy. It limited franchisees to a single restaurant. However, it appears that this change may be bearing some fruit, but time will tell.
The stock is certainly looking better these days, with both share classes trading near two-year highs. Class A shares (up 132%) and Class B shares (up 140%) have had a solid run over the past year, but it's been a rough run over the past several years. BH outpaced the S&P 500 just twice annually between 2011 and 2020, after beating the Index handily in eight of the 10 previous years.
Another positive is that shareholders equity rose $74 million to $639 million since year end, which puts the price to book ration at just .75. That's how shareholders have been told for years as to how the company measures success, growth in book value.
Meanwhile, the company's biggest investment remains its 8.7% stake in Cracker Barrel, worth more than $327 million, which is considerable, given that Biglari Holdings market cap is just $479 million. This past November, Biglari lost its fourth proxy contest which sought CBRL board seats.
Unfortunately - at least for those of us somewhat closer to NYC - the BH annual shareholder meeting, which until last year was held annually in New York, and was a multi-hour opportunity to interface with CEO Sardar Biglari, will again be held in San Antonio. The company has such limited interaction with media and analysts that this annual event is the rare opportunity to try and get information outside of SEC filings and the annual chairman's letter.
Can BH keep it going? We'll see. As a long-term shareholder I remain skeptical, but also cautiously optimistic.