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BJ's Restaurants Adds Burger Flavors, Menu Innovation in Focus

Zacks Equity Research

BJ's Restaurants, Inc. BJRI has announced that it is enriching its burger offerings by adding three flavors to its existing burger lineup. The new burger menu will include two loaded burgers such as the Bistro Burger and the Mushroom Swiss Burger; and Banh Mi Turkey Burger, available in the lower-calorie EnLIGHTened menu category.

The move reflects BJ’s Restaurants’ sincere focus on refining and streamlining its menu, which is likely to drive revenues and in turn profits. Notably, the company’s profits have been under pressure for some time now, owing to high expenses from various sales-building initiatives.

Resultantly, shares have also declined 16.9% so far this year against the industry’s 25.2% rally.

Nevertheless, the company is likely to witness top-line growth, given its focused efforts on building traffic and sales.


Menu Innovation — Key Focus

BJ’s Restaurants relies extensively on menu innovation to support revenue growth. The company’s slow-roasted menu, launched in 2017, has become a huge success. It significantly boosted average check, with high incident rates.

Additionally, the restaurant developed a robust pipeline of new menu items, focusing on its EnLIGHTened menu category, featuring its new super food options. Moving ahead, the company plans to introduce new flavors and improve the quality of its menu items.

Notably, BJ’s Restaurants’ higher-priced menu items continue to be popular and management believes that these items would boost check in the near term. In fact, the company expects to offset some of the labor pressure through prudent menu pricing and design. Additionally, its promotional offers along with bundled lunch offerings should boost sales and drive guest traffic.

Lastly, the company expanded its daily Brewhouse specials that showcase several of its most popular signature menu items at attractive prices. This, along with the happy hour special menu, is likely to drive traffic further for the company.

Our Take

We believe that by the addition of the latest burger flavors, BJ’s Restaurants is likely to witness further top-line growth. In the first quarter of 2019, revenues grew 4.3% year over year, driven by increased guest traffic and comps.

Meanwhile, BJ’s Restaurants has implemented several major sales-building initiatives, which have contributed positively to its results over the past few quarters. With increased focus on productivity and efficiency along with a plan of balanced restaurant opening, the company is further heading toward near and long-term operating success.

In 2017, the restaurant crew mastered advanced cooking methods and also became skillful in taking orders via hand-held ordering tablets. In fact, results of these initiatives have been positive so far. Notably, in the first quarter of 2019, off-premise sales increased to 10.1% of the company’s revenues, indicating an all-time high level. Further, BJ’s Restaurants expects this channel to grow at least 50% over the next several years. In 2019, the company intends to open seven to nine restaurants.

Zacks Rank & Stocks to Consider

BJ’s Restaurants currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the industry include Chipotle CMG, Denny’s DENN and Papa John’s PZZA, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chipotle and Papa John’s long-term EPS growth rates are 19.2% and 12.5%, respectively. Denny’s earnings for the next year are likely to rise 7.8%.

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Denny's Corporation (DENN) : Free Stock Analysis Report
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