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Red Robin (RRGB) Down 53% YTD: What's Hurting the Stock?

·4 min read

Shares of Red Robin Gourmet Burgers, Inc. RRGB have declined 53.2% so far this year compared with the industry’s fall of 12.2%. The downside was primarily caused by inflationary pressures and supply chain disruptions.

This Zacks Rank #5 (Strong Sell) company reported second-quarter fiscal 2022 results, wherein earnings missed the Zacks Consensus Estimate. The company posted an adjusted loss of 75 cents per share, wider than the Zacks Consensus Estimate of a loss of 12 cents. In the year-ago quarter, RRGB reported an adjusted loss of 22 cents a share.

Moreover, in the past 60 days, earnings estimates for fiscal 2023 have witnessed downward revisions of 65.9% to 15 cents per share. Let’s delve deeper and find out the factors hurting the company’s performance.

Primary Concerns

Red Robin’s performance has been negatively impacted by higher commodity and wage rate inflation, supply-chain disruptions, other charges, repairs and maintenance, utilities and marketing expenses.

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Zacks Investment Research


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In second-quarter fiscal 2022, the restaurant-level operating profit margin shrunk 210 basis points year over year to 13.6% due to commodity and wage rate inflation, partly offset by sales leverage and other labor costs. During the quarter, the cost of sales rose 17.4% year over year to $72.7 million, while as a percentage of restaurant revenues, the metric increased 240 basis points to 25.2%. While other operating costs, as a percentage of restaurant revenues, jumped 80 basis points to 18%, occupancy costs increased 10 basis points to 8%.

Red Robin has been strategically increasing prices to mitigate the impact of inflation while maintaining a strong value proposition. For 2022, the company expects pricing in the mid-single digit. It foresees a mid-double digit commodity cost inflation compared with its prior view of low double-digits. It anticipates restaurant labor cost inflation in the mid-to-high single digit.

Management envisions full-year SG&A costs in the range of $142-$147 million compared with its prior view of $145-$155 million. It now expects adjusted EBITDA to be at least $65 million, down from its prior forecast range of $80-$90 million.

Moreover, high debt remains a concern for the company. Long-term debt, as of Jul 10, 2022, stood at $189.4 million compared with $192.4 million as of Apr 17, 2022. The company ended the fiscal second quarter with cash and cash equivalent of $50.3 million compared with $33.8 million in the previous quarter.

Although the cash balance has improved sequentially, it may not be enough to manage the high debt level. The times-interest-earned ratio at the end of the fiscal second quarter came in at (2X) compared with (1.6X) reported in the previous quarter.

Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. TGLS, Cracker Barrel Old Country Store, Inc. CBRL and Arcos Dorados Holdings Inc. ARCO.

Tecnoglass sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 26% in the past three months.You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.

Cracker Barrel carries a Zacks Rank #2 (Buy). Cracker Barrel has a long-term earnings growth of 6.9%. Shares of the company have increased 28.4% in the past three months.

The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, 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 increased 6.3% in the past three months.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.


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Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report
 
Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
 
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
 
Tecnoglass Inc. (TGLS) : Free Stock Analysis Report
 
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