Earnings Preview: Red Robin Gourmet - Analyst Blog
May 16 2011 - 8:15AM
Zacks
Red Robin Gourmet Burgers
Inc. (RRGB) is scheduled to announce its first quarter
2011 results on May 19. The current Zacks Consensus Estimate for
the first quarter is 25 cents on revenue of $284.0 million.
Prior Quarter
Highlights
Red Robin had posted fourth quarter
2010 adjusted earnings of 12 cents per share, which surpassed the
Zacks Consensus Estimate of 5 cents. Earnings were up 20% from 10
cents in the year-ago quarter. However, including the effects of
restaurant closure charges and executive transition expenses, GAAP
net income during the quarter was $2.2 million or 14 cents per
share.
Revenues in the fourth quarter rose
5.7% year over year to $192.6 million and inched up slightly from
the Zacks Consensus Estimate of $192.0 million. During the quarter,
restaurant sales increased 5.4% from the year-ago quarter to $189.3
million, and franchise royalties and fees revenue surged 21.8% to
$3.1 million, attributable to higher operating weeks and comparable
sales growth.
Comparable restaurant sales inched
up 0.8% year over year for company-owned restaurants, driven by a
1.1% increase in guest count, partially offset by a 0.3% decrease
in the average guest check. Comparable sales for franchise
restaurants spiked 3.4% in the U.S. and 0.9% in Canada.
Outlook
The company foresees cost inflation
in 2011. Commodity cost is expected to increase 3% to 4% this year,
mostly due to higher ground beef and cheese prices.
Red Robin will use its capital
mostly for the development of new restaurants and enhancement of
shareholder value through share repurchases. Red Robin expects
to open 10 new company-owned restaurants, and 3 to 4 franchised
restaurants in fiscal 2011. Management projects capital expenditure
to be in the range of $39 million to $41 million in fiscal
2011.
Estimate Revision
Trend
Out of the eleven analysts
providing estimates for the upcoming quarter, none made any change
in the last thirty days. For fiscal 2011, only one analyst out of
eleven covering the stock trimmed the estimate in the last thirty
days.
None of the analysts made any
revision to forecasts over the seven-day period, thus indicating no
directional movement.
Magnitude of
Revisions
Estimates for the first quarter of
2011 have remained static at 25 cents over the last 30 days due to
the lack of significant estimate revisions by the analysts on the
stock. The estimate for 2011 was also unchanged at $1.01 over the
last 30 days. Therefore, the analysts expect the company to report
in line.
Our Take
We are pleased with Red Robin’s new
operating initiatives termed Project RED, which consists of a mix
of revenue drivers, cost-cutting initiatives, and plans to enhance
capital deployment. In order to drive revenue, Red Robin
focuses on its guest loyalty program called Red Royalty, targets
adult guests by improving alcohol beverage sales and extensively
uses a Limited Time Offer (LTO) strategy supported with television
advertising to drive traffic and create brand recognition.
However, we expect same-store sales
growth to suffer in the first quarter due to adverse weather
conditions in the early months of 2011. In fact, Red Robin also
indicated that through February 14, 2011, company-owned comparable
sales growth dropped 0.4%.
Moreover, since management took
some pricing action in April to mitigate input cost pressure, Red
Robin’s second quarter’s same store sales will benefit from that
move. The cost of the TV advertising support is expected to be
approximately $4.4 million in the first quarter of 2011.
Additionally, stiff competition
from other quick-service restaurant operators, cost escalation as
well as pre-opening costs of new restaurants will keep margins
under pressure.
One of its peers BJ’s
Restaurants Inc. (BJRI) reported first quarter 2011
adjusted earnings of 25 cents per share, which surpassed the Zacks
Consensus Estimate of 19 cents. BJ's Restaurants' revenue also came
ahead of the Zacks Consensus Estimate.
Red Robin currently retains a Zacks
#3 Rank, which translates into a short-term Hold rating. We are
also maintaining our long-term Neutral recommendation on the
stock.
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
Zacks Investment Research
BJs Restaurants (NASDAQ:BJRI)
Historical Stock Chart
From May 2024 to Jun 2024
BJs Restaurants (NASDAQ:BJRI)
Historical Stock Chart
From Jun 2023 to Jun 2024