BJ's Restaurants Inc.
) recently announced the opening of a new restaurant in its core
market of California. The new opening marks the ninth of the
company's targeted 16 new openings for fiscal 2012.
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The latest restaurant, which is located at Countryside Marketplace,
is spread across approximately 8,000 square feet and accommodates
around 265 guests. We expect the variety of menu offered at the new
unit to attract guests
The new restaurant is in Menifee, southern California, where BJ's
already enjoys a strong presence and customer's loyalty. It is
deemed to be a strategic move by the company. An additional unit in
its home turf will solidify BJ's position in the region and
increase average unit sales volume.
California still holds plenty of growth opportunities for the
company. Moreover, BJ's currently operates 124 restaurants and
almost half of those are located in California.
BJ's Restaurants is one of the few casual dining chains that have
been expanding even amid an uncertain economy. With the resurgence
of consumer confidence, management has accelerated its unit
openings. Besides opening 16 new restaurants in 2012, the company
hopes to relocate an older, smaller-format 'pizza and grill'
restaurant in Boulder, Colorado to a more appropriate site in in
the city for housing a larger BJ's restaurant. The expected new
openings in 2012 compares favorably with 13 restaurants opened in
fiscal 2011 and 10 units in 2010.
Looking forward to 2013, the company plans low double-digit
capacity increases per year in the approximate range of 11% to 13%.
One third of these openings will be in California, another third
will come in the Western states outside California and the
remaining third will be distributed amongst Florida and a few new
markets. Additionally, 50% of new stores will be conversions of old
retail locations. In the long run, there still exists the
possibility of opening at least 425 outlets in the U.S.
Furthermore, despite the turbulent economic environment, the
company continues to undertake several initiatives like menu
innovation, a new guest loyalty program, along with a new catering
program, efficiencies and price increases. These initiatives are
expected to ensure positive restaurant comparable sales in the
upcoming quarters as well as offset cost escalation.
However, the presence of popular eateries like
Red Robin Gourmet Burgers Inc
) among others is likely to increase the competition for BJ's.
BJ's currently has a Zacks #3 Rank, which implies a Hold rating
over the short term. We reiterate our long-term Neutral
recommendation on the stock.