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Red Robin Beats Q3 Earnings; Shares Fall on Guidance Cut

Red Robin Gourmet Burgers Inc.RRGB recently reported mixed third-quarter 2015 results with earnings outperforming the Zacks Consensus Estimate but revenues missing the same. Meanwhile, the company lowered the revenue guidance for 2015 for the second consecutive quarter. In response, shares declined 8.3%.

Red Robin's adjusted earnings of 58 cents per share beat the Zacks Consensus Estimate of 53 cents by 9.4%. Further, earnings jumped 16% year over year backed by strong margins and lower share count.

Red Robin Gourmet Burgers Inc. (RRGB) - Earnings Surprise | FindTheCompany

Revenues of $283.4 million missed the Zacks Consensus Estimate of $286 million by 0.9% but grew 6% year over year backed by comps growth.

Behind the Headline Numbers

During the quarter, restaurant revenues went up 5.9% year over year to $279.5 million led by positive comps growth. Franchise royalties and fee revenues increased 12.1% to about $3.9 million.

Company-owned restaurants' comps went up 3.5%, better than prior-quarter comps growth of 2.9%. Comps were driven by a 3.6% improvement in average guest check, partly offset by 0.5% increase in guest counts.

Restaurant-level operating profit margin increased 210 basis points (bps) to 21.6%. The improvement was driven by decrease in cost of sales as well as labor costs, somewhat offset by higher occupancy costs.

Cost of sales was 24.4%, down 150 bps from the year-ago quarter.

General and administrative costs were $23.7 million, up 17.9% year over year. Pre-opening and acquisition costs were $2.2 million, down 14% year over year.

2015 Revenue Guidance Lowered

Red Robin now expects total revenue growth in 2015 to be around 11% as against 12% projected earlier. This includes comparable restaurant revenue growth of nearly 2.5% compared with 3% expected previously.

Restaurant-level operating profit margins are likely to be 22.3%, marginally up from prior guidance of 22.2%.

Capital investments are expected to be roughly $170 million. The company also plans to remodel at least 150 Red Robin restaurants in 2015 as part of its brand transformation initiative and relocate three outlets.

General and administrative costs are projected to range within $102 million to $103 million, up from $100 million to $101 million. Selling expenses are likely to be 3.3% of sales. Pre-opening and acquisition costs are expected to total nearly $7 million, down from the earlier guidance of $7.5 million.

The casual dining restaurant operator remains on track to unveil 20 units and three Red Robin's Burger Works during the year.

Our Take

Red Robin's aggressive expansion strategies are yielding results. We are encouraged by the success of the company's loyalty program - Red Robin Royalty - which continues to add members. Additionally, the Colorado-based casual dining restaurant operator's new service, presentation and innovative menu items are expected to boost sales, going ahead. Further, the partnership with Ziosk to install tabletop tablets at all U.S. Red Robin restaurant should boost revenues.

Red Robin currently carries a Zacks Rank #2 (Buy). Other well-ranked stocks in the same sector are BJ's Restaurants, Inc. BJRI , Jack in the Box Inc. JACK and Dave & Buster's Entertainment, Inc. PLAY . All these stocks sport a Zacks Rank #1 (Strong Buy).

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BJ'S RESTAURANT (BJRI): Free Stock Analysis Report

RED ROBIN GOURM (RRGB): Free Stock Analysis Report

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DAVE&BUSTRS ENT (PLAY): 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 Nasdaq, Inc.


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

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