Red Robin (RRGB) Down 9.6% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Red Robin (RRGB). Shares have lost about 9.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Red Robin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Red Robin’s Q1 Earnings & Revenues Top, Margin Rises
Red Robin reported solid first-quarter fiscal 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis.
Earnings & Revenue Discussion
In the fiscal first quarter, Red Robin recorded adjusted earnings per share (EPS) of 25 cents, surpassing the Zacks Consensus Estimate of a loss of 62 cents. In the prior-year quarter, the company reported an adjusted loss per share of 12 cents.
Quarterly revenues of $418 million beat the consensus mark of $405 million. The top line increased 5.7% year over year. The upside was primarily driven by strong comps growth, courtesy of menu price increases, favorable sales channel mix and growth in restaurant traffic.
During the quarter under review, comparable restaurant revenues rose 8.6% year over year, primarily driven by an 8% rise in guest check. Average guest count increased 0.6% year over year. The rise in guest check can be attributed to a 7.2% increase in pricing and a 0.8% improvement in menu mix.
Operating Results
The restaurant-level operating profit margin was 14.7% in the fiscal first quarter (compared with 14% reported in the prior-year quarter). The figure compares to our projection of 16.9%.
During the fiscal first quarter, restaurant labor costs increased 5.3% year over year to $145.4 million. The figure compares to our projection of $129.7 million. Restaurant labor costs (as a percentage of restaurant revenues) declined 60 basis points (bps) year over year to 35.7%.
Meanwhile, other operating costs during the quarter increased 6.2% year over year to $72.1 million. The figure compares to our projection of $63.1 million. Other operating costs (as a percentage of restaurant revenues) declined 10 bps year over year to 17.7%.
During the quarter under review, cost of sales (as a percentage of restaurant revenues) increased 60 bps year over year to 24.5%. Occupancy costs (as a percentage of restaurant revenues) fell 70 bps year over year to 7.3%.
Adjusted earnings before interest expenses, income taxes, depreciation and amortization (EBITDA) during the fiscal first quarter amounted to $36.1 million (compared with $28 reported in the prior year quarter).
Other Financial Information
As of Apr 16, 2023, Red Robin had cash and cash equivalents of $49 million compared with $48.8 million as of Dec 25, 2022. Long-term debt as of Apr 16, 2023 was $203.2 almost flat sequentially. Inventories during the quarter were $25.4 million, compared with $26.4 million reported in the year-ago period.
2023 Guidance
For 2023, the company expects total revenues to be at least $1.3 billion. Restaurant-level operating profit is anticipated to be at least 13.5% up from the previous expectation of 13%.
The selling, general and administrative costs are expected in the range of $127-$132 compared with the prior anticipation of $120-$125 million. Capital expenditures are anticipated to be between $45 and $50 million compared with the prior expectation of $35 million and $40 million.
In 2023, adjusted EBITDA is expected in the range of $70-$80 million compared with the previous anticipation of $62.5-$72.5 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -13.1% due to these changes.
VGM Scores
Currently, Red Robin has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Red Robin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Red Robin is part of the Zacks Retail - Restaurants industry. Over the past month, Cheesecake Factory (CAKE), a stock from the same industry, has gained 0.4%. The company reported its results for the quarter ended March 2023 more than a month ago.
Cheesecake Factory reported revenues of $866.11 million in the last reported quarter, representing a year-over-year change of +9.1%. EPS of $0.61 for the same period compares with $0.47 a year ago.
Cheesecake Factory is expected to post earnings of $0.83 per share for the current quarter, representing a year-over-year change of +59.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.8%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Cheesecake Factory. Also, the stock has a VGM Score of A.
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Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
