Red Robin Beats Earnings by a Penny - Analyst Blog
May 22 2013 - 1:00PM
Zacks
Casual dining restaurant operator Red Robin Gourmet
Burgers Inc.’s (RRGB) earnings of 66 cents per share in
the first quarter of fiscal 2013 (ending Apr 21, 2013) surpassed
the Zacks Consensus Estimate by a penny but were 7% lower than the
comparable year-ago quarter’s earnings of 71 cents.
Earnings suffered mainly due to the seasonality resulting from
the change in the company’s financial calendar. A shift in sales
and change in media timing reduced the quarterly earnings by 10
cents per share.
Amid sluggish industry sales, Red Robin has achieved a 2.3% year
over year rise in its revenues to $306.3 million in the first
quarter. However, the revenues were below the Zacks Consensus
Estimate of $310 million by 1.2%. Higher comparable restaurant
sales (comps) and various sales-driving initiatives boosted the top
line during the quarter, offset by a decline in traffic due to a
change in the company’s reporting time.
Behind the Headline Numbers
Red Robin earns revenues from its company-owned as well as
franchised restaurants. During the quarter, restaurant revenues
jumped 2.3% year over year to $301.3 million, fueled by both unit
expansions as well as higher comps. Franchise royalties and fee
revenues were up 4.5% year over year to nearly $5.0 million.
Company-owned restaurants’ comps grew 2.2%, benefitting from the
better pricing and higher average guest check. However, a 0.6%
decline in guest count adversely affected the comps during the
quarter. A rise in the sales of beverages and appetizers, and
positive pricing have helped the averageguest check to increase
2.8% in the first quarter.
Restaurant operating margin expanded 30 basispoints (bps) to
21.5% at company-owned restaurants benefiting from the decline in
food and beverage costs and other operating costs, offsetting the
adverse impact from the rise in the labor as well as occupancy
costs.
Liquidity
Red Robin ended the quarter with cash and cash equivalents of
$17.4 million versus $22.4 million in the previous quarter. Total
outstanding debt was $100.2 million as compared with $135.0 million
in the fourth quarter.
Cash generated from operations was $40.4 million versus $29.6
million in the year-ago period.
Store Update
During the quarter, three Red Robin restaurants were unveiled.
Red Robin currently operates 337 restaurants, out of which five are
Red Robin’s Burger Works restaurants, 133units are franchised and
the rest are company-owned.
Outlook
For fiscal 2013, Red Robin reiterated its guidance for comps. The
company continues to expect comps to grow 2.5% to 3% with the rise
in prices, items sold per guest and rise in guest count.
The restaurant operating margin is projected to be 20.9%, up
from the previous estimate of 20.7%. The margin is expected to gain
from moderated commodity costs. However, a one-time rollout cost
resulting from the brand transformation and restaurant innovation
would slightly hurt the margin.
The casual dining restaurant operator remains on track to unveil
20 Red Robin units and also planning to remodel an equal number of
restaurants in fiscal 2013.
A 1% shift in guest count, a 10 bps increase in margin and a
$187,000 change in pre-tax income or expenses are expected to
impact earnings by 23 cents, 5 cents and a penny, respectively in
fiscal 2013.
Our Take
Seattle, Wash.-based Red Robin struggles in terms of earningsand
guest count due to the shift in its fiscal calendar. However, the
company’s top-line growth and unit expansion is quite impressive.
Some of the company’s operational strategies such as cost savings
and guest loyalty program — Red Robin Royalty — brings a ray of
hope for this Zacks Rank #2 (Buy) stock.
However, economic uncertainties and continued investments in
sales-driving initiatives, which may lower margins are matters of
concern.
Some other restaurateurs like McDonald’s Corp.
(MCD) missed our estimates on both lines this season while
Yum! Brands Inc. (YUM) beat earnings but missed
out on revenues. Another company, The Cheesecake Factory
Inc. (CAKE) was ahead of the estimates on both counts.
CHEESECAKE FACT (CAKE): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis Report
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