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

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  • BJRI
  • JACK

BJ's Restaurants, Inc. BJRI is likely to benefit from menu-refinement initiatives, off-premise business and expansion efforts. Also, focus on Beer Club subscription services bodes well. Rise in meat, seafood and liquor costs are headwinds.

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

Factors Driving Growth

BJ’s Restaurants continues to focus on refining and streamlining its menu for improved traffic. During second-quarter fiscal 2021, the company continued testing of its virtual brand — slow roast — at approximately 30 restaurants across California and Texas. The company reported impressive sales and solid customer feedback on the back of slow roast items and other protein-centric product offerings. Going forward, the company continues to focus on menu adjustments and pricing structure, as it intends to establish a broader rollout plan in the upcoming periods.

Moreover, the company stated that it gained traction with reference to its Beer Club subscription services in California. The company is witnessing high customer engagement on the back of new beer releases and program benefits. In a bid to drive incremental visits and spend in its restaurants, the company plans to expand this program at majority of its California restaurants. Also, it is focusing on expanding services in Texas and Florida backed by the recent adoption of alcohol-related legislation.

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 has been boosting consumers' convenience and order accuracy. During second-quarter fiscal 2021, off-premise sales came in at approximately $24,000 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.

The company is striving to increase its new restaurant openings to achieve a minimum of 5% increase in operating weeks as well as to derive high single digits revenue growth over the longer term. During fiscal second quarter, the company opened new restaurants in Merrillville, Indiana and Lansing, MI. Moreover, the company stated its intention to re-open its restaurant in Richmond, VA over the next month. Going forward, the company plans to open eight to 10 restaurants in fiscal 2022. Also, it remains steadfast in its commitment to expand presence to at least 425 restaurants domestically.

Concerns

Zacks Investment Research
Zacks Investment Research


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In the past three months, shares of BJ’s Restaurants have fallen 31% against the industry’s growth of 6.3%. The dismal performance can be primarily attributed to the coronavirus pandemic. Although the company has reopened most of its restaurants, possibility of additional outbreaks can lead to reduced capacity, implementation of social distancing protocols as well as further suspension of in-restaurant dining operations. Delta variant of coronavirus might hurt traffic and sales in the upcoming period.

Moreover, the company is persistently bearing the brunt of higher expenses, which have been detrimental to margins. Pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on margins. During fiscal second quarter, the company’s cost of sales increased 136.3% year over year to $75.6 million. As a percentage of revenues, cost of sales came in at 26.0% for fiscal second quarter compared with 25.0% in the prior-year quarter. The upside was primarily driven by a rise in meat, seafood and liquor costs. The company is also facing high general and administrative expenses. During fiscal second quarter, general and administrative expenses came in at $17 million compared with $14.5 million in the prior-year 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 other better-ranked stocks in the same space include Papa John's International, Inc. PZZA, Brinker International, Inc. EAT and Jack in the Box Inc. JACK, each carrying a Zacks Rank #2 (Buy).

Papa John's 2021 earnings are expected to increase 122.9%.

Brinker has a three-five year earnings per share growth rate of 10%.

Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.


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Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report

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