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

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·4 min read
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BJ's Restaurants, Inc. BJRI is likely to benefit from its expansion efforts, digitization and remodeling initiatives. Also, emphasis on Brewhouse Beer Club services bodes well. However, pandemic-induced supply chain disruptions and inflationary pressures are a concern.

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

Factors Driving Growth

BJ's Restaurants is striving to increase its new restaurant openings to achieve a minimum of 5% increase in operating weeks and derive high single-digit revenue growth over the longer term. During the fiscal first quarter, the company opened a new restaurant in Charlotte, NC. It also opened a new restaurant in San Antonio, TX. The company reported solid performance related the openings. The company plans to open eight new restaurants in fiscal 2022. It remains steadfast in its commitment to expand its presence to at least 425 restaurants domestically.

The company is investing in technology-driven initiatives like digital ordering to boost sales. Also, productivity-improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line. The company continues to drive awareness in its key markets through enhanced and more targeted marketing. During the first quarter of fiscal 2022, the company emphasized on 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 enhancing 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.

To boost sales from its dine-in services, the restaurant operator has initiated testing of new ideas and design features. During the first quarter of fiscal 2022, the company made solid progress related its two pilot remodels concerning dining room capacity expansion and new design elements. The company added three new large booths for extra seating capacity and larger TVs to improve the dining experience. Backed by positive customer feedback and increased sales levels generated from the remodeled locations, the company remains optimistic and expects to proceed with this initiative in the upcoming periods.

The company stated that it gained traction in its Beer Club subscription services in California. The company is witnessing high customer engagement on the back of new beer releases and program benefits. To drive incremental visits and spending in its restaurants, the company emphasized on creating a more iconic brewhouse signature food and drink menu items while elevating its high-quality ingredients and presentation. BJRI intends to optimize the program and expand its offering to additional states.

Concerns

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Zacks Investment Research


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In the past three months, shares of BJ’s Restaurants have declined 14% compared with the industry’s fall of 6.9%. The dismal performance was primarily caused by the coronavirus crisis. Pandemic-induced supply chain disruptions and inflationary pressures had taken an enormous toll on the company. Although most dining services are open, traffic is still low compared with pre-pandemic levels. The company intends to monitor the situation regularly to gauge the impacts of COVID-19.

Moreover, the company is persistently bearing the brunt of higher expenses, which have been detrimental to margins. During the fiscal first quarter, the company cited concerns about commodity cost inflation. During the quarter, the company’s cost of sales, as a percentage of revenues, came in at 27.3% compared with 25.1% reported in the prior-year quarter. The upside was primarily driven by the rise in food costs, partially mitigated by menu price increases. For the upcoming quarter, the company anticipates commodity cost inflation to be in high single-digit.

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 Dollar Tree Inc. DLTR, BBQ Holdings, Inc. BBQ and Arcos Dorados Holdings Inc. ARCO.

Dollar Treesports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 13.1%, on average. Shares of the company have gained 54% in the past year.

The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and earnings per share (EPS) suggests growth of 6.7% and 40.5%, respectively, from the year-ago period’s levels.

BBQ Holdings carries a Zacks Rank #2 (Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have decreased 20.7% in the past year.

The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 46.1% and 67.6%, respectively, from the year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2. Arcos Dorados has a long-term earnings growth of 34.4%. Shares of the company have risen 7.8% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 83.3%, respectively, from the year-ago period’s levels.


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