Red Robin Gourmet Burgers, Inc.
), a chain of casual dinning restaurants, recently announced that
its board of directors has reauthorized a share repurchase
program of up to $50 million worth of its common stock, which is
set to conclude at the end of 2012.
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The stock buyback would be effective from January 1, 2013, or
when the current buyback program concludes, whichever is earlier.
The company seeks to execute the program in the open market or in
negotiated transactions, depending on the share price and other
Moreover, with cash and cash equivalents of $26.9 million as of
September 30, 2012, the company has enough cash balance to reward
its shareholders. The share repurchase program will also reduce
the number of shares outstanding, which stood at 14.5 million as
of September 30, 2012.
This restaurant operator remains focused on enhancing shareholder
value. In the recently reported quarter, Red Robin repurchased
266,000 shares for $7.9 million. The company has shares worth
$32.0 million still available under its current $50 million
program, as of September 30, 2012.
One of its competitors,
Chipotle Mexican Grill, Inc.
) has also recently announced a share repurchase program of $100
million of its common stock. This comes in addition to the
existing $60 million shares available for repurchase under its
current buyback program of $100 million. Another peer,
Yum! Brands Inc.
), also recently authorized additional repurchase of up to 1
billion of its common stock, through May 31, 2014.
We appreciate Red Robin's efforts to bolster long-term
shareholders' value. We believe that the share repurchase
authorization affirms the company's positive outlook and reflects
its confidence in its fundamentals. Concurrently, buying back of
shares underlines the company's strategy to increase
shareholders' value in the long run. The announcement is not only
expected to reinforce shareholders' confidence but also boost the
market value of the outstanding shares.
The company reported third-quarter 2012 results above the Zacks
Consensus Estimate, driven by top-line growth and margin
expansion. The company's Project RED which focuses on revenue
growth, expense control and capital deployment continues to drive
its performance. In addition, Red Robin's focus on menu
innovation, unit growth, store remodeling, and investments to
improve operational efficiency also augurs well for its earnings.
However, commodity cost pressure; lower consumer spending and
cut-throat competition related to price remain headwinds
Red Robin, currently retains a Zacks #3 Rank, which translates
into a short-term 'Hold' rating. We are also maintaining our
long-term 'Neutral' recommendation on the stock.