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.
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.
Image Source: Zacks Investment Research
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.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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
To read this article on Zacks.com click here.
Zacks Investment Research