RRGB Red Robin Gourmet Burgers Inc

Colorado-based Red Robin Gourmet Burgers Inc (RRGB) recently announced that Katie Scherping will step down as its Chief Financial Officer (CFO) effective July 15, 2011. On the same day, Susan Lintonsmith will also resign from her post of Chief Marketing Officer (CMO). The company has begun the search for their successors.

Both Scherping and Lintonsmith played a key role in consolidating the future of the company. Scherping boasts an experience of more than 25 years in the field of finance, accounting and management. She joined Red Robin in 2005. Lintonsmith, who has an experience of 20 years in marketing, joined the company in 2007.

Though the exact reason for their departure was not disclosed, management did mention that the exit of Scherping was not related to any disagreement with the board, audit committee or auditors.

We believe that despite the upcoming change in management, the company will continue to make progress in its turnaround plan. In 2011, the company intends to turn around its business through Project RED, which focuses on revenue growth, expense control and capital deployment.

The casual dining chain expects to drive revenues by deploying a guest loyalty program called Red Royalty and increasing the bar business. The company also intends to deploy a Limited Time Offer (LTO) strategy supported by television advertising to drive traffic and create brand recognition. Red Robin is also targeting cost-cuts of $16–18 million by the end of 2012 to expand margins. The project is progressing quite successfully, thereby boosting the outlook for sales and margins.

In the recent first quarter 2011 results, the company reported adjusted earnings of 58 cents per share, comprehensively beating the Zacks Consensus Estimate of 24 cents, benefiting from the early success of the Project RED initiative. Total revenue of $286.8 million in the first quarter was slightly ahead of the Zacks Consensus Estimate of $284.0 million.

We currently retain a Zacks #1 Rank, which translates into a short-term Strong Buy rating on the stock. We also reiterate our long-term Outperform recommendation. One of its competitors Kona Grill, Inc (KONA) also recently announced that its CEO and President Marc A. Buehler resigned to pursue other opportunities.

 
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