Red Robin Gourmet Burgers Inc.
) reported earnings of 52 cents per share in the second quarter of
2012, surpassing the Zacks Consensus Estimate of 50 cents as well
as the year-ago quarter adjusted earnings of 48 cents per share.
Results in the quarter benefited from cost improvement resulting in
margin expansion and top-line growth.
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The company reported total revenue of $223.7 million in the second
quarter, up 3.7% year over year but below the Zacks Consensus
Estimate of $225.0 million.
During the quarter, restaurant sales leaped 3.7% from the year-ago
quarter to $219.9 million and franchise royalties and fees revenue
crept up 1.7% to $3.7 million.
Comparable restaurant sales inched up 0.8% year over year at
company-owned restaurants in the reported quarter, driven by a 0.9%
increase in guest count, partially offset by a 0.1% dip in average
Restaurant operating margin at company-owned restaurants enhanced
30 bps to 21.1%, due to a drop of 10 bps in labor costs and a
decline of 60 bps in other operating costs, partially compensated
by a 20 bps increase in food and beverages cost and 20 bps hike in
Selling, general and administrative expenses in the quarter were
flat at $25.6 million, due to higher equity-based compensation
costs, new information technology development costs and higher
costs related to gift card sales.
Red Robin ended the quarter with cash and cash equivalents of $29.9
million, total outstanding debt of $135.0 million and shareholders'
equity of $310.0 million. During the quarter, the company
repurchased 255,000 shares for $7.7 million and currently, has
$40.0 million remaining under its share repurchase authorization.
During the quarter, Red Robin opened a small prototype restaurant,
Red Robin's Burger Works, and closed a company-owned restaurant.
During the quarter, five franchised restaurants were also sold or
closed. Red Robin currently operates 462 restaurants, out of which
331 are company-owned and the rest franchised.
Through 2012, Red Robin expects comps to grow 0.5% as compared to
the prior-year expectation of 1%, due to a dip in traffic,
particularly at dinner as a result of the Olympic games. Restaurant
operating margins are estimated to expand in between 20% to 20.5%
(up from the prior projection of 20.0%), benefiting from lower
operating costs and cost of sales.
In 2012, the casual dining restaurant operator expects to open 14
new company-owned restaurants including 4 additional Red Robin's
Red Robin's Project RED initiative, which focuses on revenue
growth, expense control and capital deployment is progressing quite
well and going forward will continue to focus on these areas to
increase the profitability of the company. We expect estimates to
decrease in the coming days, as comparable restaurant sales growth
are expected to suffer in the third quarter, as a result of the
Olympics games. The Zacks Consensus Estimates for 2012 and 2013
stands at $1.84 and $2.10, respectively.
However, we remain cautious on the stock based on cost inflation,
lower consumer spending and intense competition from peers like
Brinker International inc. (
) and Domino's Pizza Inc. (
) with respect to price, service, location and concept in order to
The company retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We also have a long-term Neutral
recommendation on the stock.