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BJ's Restaurants (BJRI) Posts Q1 Loss, Lags Sales Estimates

Zacks Equity Research

BJ's Restaurants, Inc.’s BJRI shares dropped 3.1% in the after-hour trading session on May 7, after it reported first-quarter 2020 results, wherein the bottom line surpassed analysts’ expectation but the top line missed the same. With this, the company’s bottom line surpassed estimates for seven straight quarters, while the top line beat the same in five of the trailing seven quarters.

Adjusted loss (excluding an impairment charge of 12 cents per share) of 10 cents per share was narrower than the Zacks Consensus Estimate of a loss of 38 cents. In the year-ago period, it had reported adjusted earnings of 62 cents per share. On a GAAP basis, the company reported a loss per share of 22 cents in the first quarter.

Revenues & Comps

Total quarterly revenues of $254.6 million missed the consensus estimate of $261.7 million by 2.7%. The top line also declined 12.4% year over year. Lower comparable restaurant sales led to the decline. However, total restaurant operating weeks increased 3.2% from the prior-year quarter.

Comparable restaurant sales declined 15.5% from the prior-year quarter. In the year-ago period, comparable restaurant sales grew 2%. Prior to the COVID-19 pandemic, comparable restaurant sales grew 1.5% in the first eight weeks of the quarter. However, the metric declined 40.4% in the last five weeks of the quarter owing to the pandemic.

BJs Restaurants Inc Price, Consensus and EPS Surprise

BJs Restaurants Inc Price, Consensus and EPS Surprise

BJs Restaurants Inc price-consensus-eps-surprise-chart | BJs Restaurants Inc Quote

Expenses & Operating Margins

Labor costs, as a percentage of sales, increased 460 basis points (bps) year over year to 40.8%. Occupancy and operating costs (as a percentage of sales) were 24.1%, up 290 bps year over year. General and administrative expenses (as a percentage of sales) declined 120 bps to 4.6% in the quarter.

Restaurant-level operating margin was 10.1%, down 730 bps from the year-ago quarter.

Restaurant Count

The company expanded footprint during the reported quarter, courtesy of the opening of its first restaurant in the state of Massachusetts in North Attleboro. Although BJ’s Restaurants had earlier planned to open 8-10 restaurants in 2020, it now expects to open one additional restaurant later this year. It has either canceled or delayed the remaining new restaurant openings for fiscal 2020 due to this uncertainty situation.

As of Mar 31, 2020, BJ’s Restaurants owned and operated 209 casual dining restaurants in 29 states. Due to the COVID-19 crisis, the company has temporarily suspended the dine-in service in the majority of its restaurants. Presently, menu offerings and hours are limited, and four restaurants have been temporarily closed. Nonetheless, the company has been focusing on growing off-premise sales. Recently, it made some enhancements to its mobile app and online ordering platform. It also expanded large party menu and third-party delivery partnerships that enabled it to seamlessly transition to higher off-premise volumes during this pandemic.

Greg Trojan, BJ’s Chief Executive Officer, said, “Once we have resumed normal operations, as conditions permit, we expect to resume our restaurant opening objectives as we continue our national expansion to at least 425 BJ’s restaurants.”

Balance Sheet

As of Mar 31, 2020, cash and cash equivalents totaled $80.3 million compared with $22.4 million on Dec 31, 2019. Total debt increased to $231.8 million as of Mar 31, 2020 from $143 million at 2019-end.

Zacks Rank & Key Picks

BJ’s, which shares space with Chipotle Mexican Grill, Inc. CMG in the Zacks Retail – Restaurants industry, currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Retail-Wholesale sector include Domino's Pizza, Inc. DPZ and Yum China Holdings, Inc. YUMC, each carrying a Zacks Rank #2 (Buy).

Domino's 2020 earnings are expected to increase 14.2%.

Yum China’s earnings beat the Zacks Consensus Estimate in the last four quarters, with a positive earnings surprise of 62.9%, on average.

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