RRGB Red Robin Gourmet Burgers Inc

Deerfield, Illinois-based Cosi Inc. (COSI) recently announced that it has inked a deal with CRM Partners Inc., its franchisee in New Jersey, to open a new restaurant in Hackensack. The unit is scheduled to open in May and it will mark the fourth restaurant of the company in the state. The company currently operates 136 restaurants, out of which 80 are company-owned and 56 franchised.

We believe the opening of the new restaurant in New Jersey, one of the most densely populated state in U.S as well as one of the wealthiest states with respect to household income, will immensely benefit the company in driving traffic. Moreover, we believe the company should continue to open new restaurants in order to enhance its market share as industry peers such as Red Robin Gourmet Burgers Inc. (RRGB) and The Cheesecake Factory Inc. (CAKE) are also on a modest expansion mode.

The company recently reported a 2.6% rise in its system-wide comparable restaurant sales for the fourth quarter of 2011, after witnessing declining comps for two consecutive quarters.

The upside in comps was driven by new initiatives and seasonally mild weather conditions. The premium casual dining restaurant chain operator expects the same trend to continue in the first quarter of 2012.

Sales for the fourth quarter of 2011 also rose on the back of one extra week of operation compared with the year-ago quarter, same-store sales growth and higher company-owned restaurant sales.

Total revenue, which comprises company-operated restaurant sales and franchise fees and royalties, jumped 3.3% year over year to $26.2 million. Sales also surpassed the Zacks Consensus Estimate of $24.0 million.

To further drive revenue, Cosi launched an enhanced catering menu at the beginning of the ongoing fourth quarter. Cosi is also planning to implement online catering access, which is slated for launch in 2012.

The fast casual restaurant company is slated to release its fourth quarter 2011 results on March 29, 2012. Estimates have not budged in the last 30 days, implying that the analysts do not see any near-term catalysts. The Zacks Consensus Estimate for 2011 and 2012 are pegged at a loss of 12 cents and earnings of 2 cents, respectively.

Cosi currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Underperform recommendation on the stock.

 
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