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

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·4 min read
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BJ's Restaurants, Inc. BJRI is likely to benefit from off-premise services, menu refinement initiatives and digital efforts. Also, focus on beer subscription service bodes well. However, decline in traffic and increased operating 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’ reopened majority of its dining rooms with limited capacity, its off-premise operations continue to be a driving factor for overall sales. Notably, upgrade of kitchen systems along with front-end order and pickup technology have been boosting consumers' convenience and order accuracy. During first-quarter 2021, off-premise sales came in at approximately $26,000 per week. Going forward, the company expects the momentum to continue as more customers are resonating well with the expanded off-premise offerings along with its connected curbside service.

Moreover, the company continues to focus on refining and streamlining its menu for improved traffic. During fourth-quarter 2020, the company began testing its virtual brand — slow roast — across its 13 restaurants. The delivery-only concept features slow roast items and other protein-centric products. Backed by impressive sales and solid customer feedback, the company expanded the testing to approximately 30 restaurants across California and Texas in first-quarter 2021. Nonetheless, the company continues to focus on menu adjustments and pricing structure, as it intends to establish a broader rollout plan in the upcoming periods.

Apart from this, the company continues to drive awareness in its key markets through greater and more targeted marketing. In order to attract more customers, the company rolled out several initiatives like digital check-ins, digital menus and digital payment options. Also, its transition from the current PDF form factor to a dynamic HTML version is encouraging.

Meanwhile, the company has been receiving positive reviews with respect to its beer subscription service — Beer Club. Notably, high customer engagement is being witnessed owing to new beer releases along with program benefits. Going forward, the company plans to expand this program at majority of its California restaurants and other states as well.

Concerns

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Zacks Investment Research

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In the past three months, shares of BJ’s Restaurants have fallen 16.3% against the industry’s growth of 3.3%. The dismal performance can be primarily attributed to the coronavirus pandemic. Although the company reopened majority of its restaurants, it is likely to witness dismal traffic due to the pandemic. We believe that the coronavirus pandemic will continue to hurt traffic and sales in the near future as well.

Moreover, the company is continuously shouldering increased expenses, which have been detrimental to margins. Pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on margins. The company is also facing high general and administrative expenses. During the first quarter, general and administrative expenses (as a percentage of sales) increased 220 bps year over year to 6.8%.

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 same space include Chuy's Holdings, Inc. CHUY, Dine Brands Global, Inc. DIN and Red Robin Gourmet Burgers, Inc. RRGB. Chuy's Holdings and Dine Brands sport a Zacks Rank #1, while Red Robin carries a Zacks Rank #2 (Buy).

Chuy's Holdings has a trailing four-quarter earnings surprise of 127.6%, on average.

2021 earnings for Dine Brands and Red Robin are expected to surge 269.3% and 98.9%, respectively.

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BJs Restaurants, Inc. (BJRI) : Free Stock Analysis Report

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