BJRI Down to Underperform - Analyst Blog
April 01 2013 - 7:50AM
Zacks
On Mar 28, we downgraded our recommendation on BJ's
Restaurants Inc. (BJRI) from Neutral to Underperform based
on sluggish same-store sales performance in the past few quarters
and choppy sales environment expected ahead.
Why the Downgrade?
BJ’s Restaurants’ comps growth has been sluggish in the past few
quarters. In both the third and fourth quarter of 2012, the
company’s same-store sales growth of 2.3% and 3.0%, respectively
slowed down from prior year level of 6.5% and 5.1%. Even in the
first seven weeks of first quarter 2013, comparable restaurant
sales were negative 0.5% in contrast to positive 4% for the same
period last year.
With higher payroll taxes, delayed tax refund and increased
gasoline prices, the sales environment is expected to remain choppy
going forward as consumer spending is low. The chain is also
suffering on the margins front. Management believes that BJ’s
Restaurants lacks a wider operational trail and scale as well as
advertising strength compared with its major mass market peers.
BJ's Restaurants also incurs the highest labor cost as a percentage
of sales in the first quarter of each year primarily due to higher
payroll taxes and benefits, which have an adverse impact on its
margins.
Further, after expanding steadily in its existing markets in
California and Texas, the company is considering other potential
new markets for entry in 2013. We believe that penetration into new
markets will involve some risk for BJ’s Restaurants. There will be
an attendant headwind of higher pre-opening costs in these areas
compared with matured trade areas, in which the company already has
support infrastructure.
Other Stocks to Consider
Some other restaurant industry stocks with a favorable Zacks Rank
include Red Robin Gourmet Burgers Inc. (RRGB),
Burger King Worldwide Inc. (BKW) and
Cracker Barrel Old Country Store Inc. (CBRL) While
Red Robin holds a Zacks Rank #1 (Strong Buy), Burger King and
Cracker Barrel carry a Zacks Rank #2 (Buy).
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
BURGER KING WWD (BKW): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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