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Here's Why You Should Retain BJ's Restaurants (BJRI) Stock

BJ's Restaurants, Inc. BJRI is likely to benefit from off-premise services, digital initiatives and remodel programs. However, the rise in food inflationary costs and marketing expenses are headwinds.

Let us discuss the factors that highlight why investors should hold on to the stock for the time being.

Factors Driving Growth

Even though BJ’s Restaurants is witnessing improvement in dining room traffic, its off-premise operations continue to be a driving factor for overall sales. The company stated that its off-premise sales was elevated from the pre-COVID levels.

In third-quarter 2022, off-premise sales were at the low $20,000s. Notably, upgrades of kitchen systems, along with front-end order and pickup technology, have been boosting consumers, convenience and order accuracy.

The company is working on a number of initiatives to boost its off-premise experience. To this end, it initiated the piloting of a digital order tracker and integrated it with the digital curbside check-in portal.. The initiative provides real-time progress information for guests ordering take-out, curbside and white-label delivery.

Backed by the increased use, coupled with positive customer feedback, the company anticipates a broader rollout, going forward. The initiative will likely reduce friction throughout the guest experience and optimize all channels, including take-out, curbside pickup and delivery, thereby paving the way for growth in the upcoming period.

The company is investing in technology-driven initiatives to boost sales. In the third quarter of fiscal 2022, the company integrated an order tracker with its existing digital curbside check-in portal to boost its digital offering. Also, it updated the software in its server tablets to improve functionality and reliability.

Apart from this, the company emphasized refreshing its e-commerce platform with a new modern user experience and advanced functionality. The new platform focuses on a personalized and one-to-one approach to digital marketing. It also offers personalized content and dynamic recommendations for the enhancement of guest interaction.

Given the applied learnings, coupled with fine-tuning of the program, the company anticipates the initiative to drive growth in the upcoming periods.

The company focuses on pilot remodels, concerning dining room capacity expansion and new design elements, to drive growth. It expanded the initiative to seven restaurants and reported solid sales from the remodeled locations. Backed by positive customer feedback, the company is optimistic in this regard and expects to proceed with the initiative in the upcoming period. It intends to remodel two patios in the fourth quarter to boost its operational capacity and drive growth.



Zacks Investment Research
Zacks Investment Research

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In the past year, shares of BJ’s Restaurants have lost 24.2% compared with the industry’s 11.4% fall. The downsides were mainly inflationary pressures and supply-chain challenges. Although most dining services are open, traffic is still low compared with the pre-pandemic level. The company intends to monitor the situation regularly to gauge the impacts of COVID-19.

BJ’s Restaurants is continuously shouldering increased expenses, which have been detrimental to margins. Higher food inflationary costs, marketing expenses and costs related to sales-boosting initiatives are weighing on the company’s margins. In the fiscal third quarter, labor costs (as a percentage of sales) were 37.7%, up 50 basis points year over year. Occupancy and operating costs (as a percentage of sales) were 24.7%, up from 24.4% reported in the year-ago quarter.

Zacks Rank & Key Picks

BJ’s Restaurants 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 are Tecnoglass Inc. TGLS, Wingstop Inc. WING and Chuy's Holdings, Inc. CHUY.

Tecnoglass currently sports a Zacks Rank #1. Shares of the company have gained 17.6% in the past year.

The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 11.2% and 9%, respectively, from the year-ago period’s reported levels.

Wingstop carries a Zacks Rank #2 (Buy) at present. WING has a long-term earnings growth rate of 12%. Shares of WING have lost 18.7% in the past year.

The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.4% and 16.1%, respectively, from the year-ago period’s reported levels.

Chuy’s Holdings currently carries a Zacks Rank #2. CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have declined 6% in the past year.

The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 8.9% and 11.2%, respectively, from the year-ago period’s reported levels.

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