Red Robin Beats on Q3 Earnings & Rev; Ups View - Analyst Blog

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Casual dining restaurant operator Red Robin Gourmet Burgers Inc.' s ( RRGB ) third-quarter 2013 earnings of 32 cents per share breezed past the Zacks Consensus Estimate of 27 cents by 18.5% and the year-ago quarter's earnings of 24 cents per share by 33.3%. Earnings were boosted by decent top-line growth and margin expansion.

Red Robin recorded an 8.1% year-over-year rise in revenues to $230.7 million in the third quarter. Higher comparable restaurant sales (comps) and various sales-driving initiatives benefited the top line during the quarter. Revenues also came ahead of the Zacks Consensus Estimate of $227 million.

Behind the Headline Numbers

During the quarter, company-owned restaurant revenues grew 8.1% year over year to $226.8 million, fueled by both higher operating weeks and higher comps. Franchise royalties and fee revenues were up 5.5% to about $3.8 million.
Company-owned restaurants' comps grew 5.7%, mainly benefiting from higher average guest check (up 4.6%). Also, a 1.1%% increase in traffic helped drive the expansion in comps.

Restaurant operating margin expanded 70 basis points (bps) to 20.4% thanks to the increased average check that made up for higher food and beverage costs.

Store Update

During the quarter, 6 company-owned Red Robin restaurants and 2 franchised units were unveiled. At the end of the third quarter, Red Robin has 345 restaurants. Of this, 5 are Red Robin's Burger Works restaurants, 135 units are franchised and the rest are company-owned.
Outlook

For fiscal 2013, Red Robin raised its expectation for comps and restaurant operating margin.
The company now expects comps to grow nearly 4% as against its prior expectation of 3% owing to better-than-expected performance in the first half. The company had earlier raised the comps guidance from the range of 2.5%--3.0% in the second quarter.

Restaurant operating margin is now projected to be 21.7%, up from the previous estimate of 21.3%. Red Robin has been increasing its margin guidance for three quarters in a row thanks to the continued sales leverage.

The casual dining restaurant operator intends to unveil 21 Red Robin units and remodel 20 restaurants in full year 2013.

Our Take

Red Robin's continuous top-line growth, margin expansion and increased guidance are quite impressive. Some of the  its operational strategies such as cost savings and its guest loyalty program - Red Robin Royalty - have been the strength of this Zacks Rank #2 (Buy) stock. Also, its foray into the smaller prototype - Red Robin's Burger Work -- is another positive for the stock.


Some other players in the restaurant industry, which are similarly placed and look attractive at current levels, include Bob Evans Farms, Inc. ( BOB E), Cracker Barrel Old Country Store, Inc. ( CBRL ) and B urger King Worldwide Inc. ( BKW ), all carrying a Zacks Rank #2.



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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BKW , CBRL , RRGB

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