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Red Robin (RRGB) Stock Up Despite Q4 Earnings & Revenues Miss

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Red Robin Gourmet Burgers, Inc. RRGB reported weak fourth-quarter fiscal 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate after beating the same in the preceding quarter.

Despite reporting lower-than-expected results, the company’s shares increased 4.8%. Investor sentiment received a boost following the company’s announcement that demand for casual dining, increase in average guest check and robust off-premise sales will drive Western markets growth in 2021.

The company reported adjusted loss per share of $1.79 in the quarter under review, wider than the Zacks Consensus Estimate of a loss of $1.29. In the year-ago quarter, the company had reported adjusted loss of 36 cents.

Paul J. B. Murphy III, Red Robin’s president and CEO, said, “There is no doubt that increased dining restrictions during the fourth quarter in California, Colorado, Oregon, and Washington had a significant, negative impact to our topline momentum. However, we are bullish as we look to the future reopening of these markets, which represented almost 40% of our 2019 restaurant sales.”

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise
Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

Red Robin Gourmet Burgers, Inc. price-consensus-eps-surprise-chart | Red Robin Gourmet Burgers, Inc. Quote

Revenue Discussion

Quarterly revenues of $201.1 million lagged the consensus mark of $205 million. Moreover, the top line declined 33.6% year over year on account of limited dining room capacity operations at re-opened restaurants due to the coronavirus pandemic.

Comparable restaurant revenues slumped 29% year over year on account of a decline of 28.8% and 0.2% in guest count and average guest check, respectively. The decline in average guest check can be attributed to a 2.9% fall in menu mix and 0.3% increase in discounts, partially offset by a 3% increase in pricing.

Operating Results

Restaurant-level operating profit margin came in at 6.2% for the fiscal fourth quarter compared with 18.9% in the year-ago period.

Restaurant labor costs (as a percentage of restaurant revenue) rose 500 basis points (bps) year over year to 39.5% in the fiscal fourth quarter. The increase was primarily driven by sales deleverage and higher wage rates. Other restaurant operating costs increased 380 bps year over year to 19.1%.

Cost of sales declined 90 bps year over year to 22.1%. Occupancy costs increased 290 bps year over year to 11.8% due to sales deleverage.

Adjusted earnings before interest, taxes and amortization was ($6.4) million against earnings of $26.7million reported in the year-ago quarter.

Other Financial Information

As of Dec 27, 2020, the company had cash and cash equivalents of $16.1 million compared with $30 million at the end of Dec 29, 2019. Inventories in the reported quarter declined 9.9% to $23.8 million. As of Dec 27, 2020, its long-term debt was $161 million compared with $206.9 million as on Dec 29, 2019.

Guidance

The company provided limited guidance due to the coronavirus pandemic. Management announced that rise in casual dining demand, higher average guest check and robust off-premise sales will in Western markets will drive the company’s comparable restaurant revenues in fiscal 2021.

It further added that mixture of enterprise pricing, outdoor seating capacity expansions, restoration of full operating hours, and Donatos expansion will drive comparable restaurant sales growth in the range of mid-to-high single digit.

Red Robin anticipates capital expenditure in the range of $45 million to $55 million.

Other Information

Red Robin announced that Donatos will generate annual company pizza sales of more than $60 million and profitability in an excess of $25 million by 2023. In 2021, the company is likely to add Donatos to nearly 120 restaurants.

Zacks Rank & Peer Releases

The company currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Yum! Brands, Inc. YUM reported strong fourth-quarter 2020 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics improved year over year. The company’s adjusted earnings of $1.15 beat the Zacks Consensus Estimate of 99 cents. In the prior-year quarter, the company had reported adjusted earnings of $1.00. Quarterly revenues of $1,743 million surpassed the consensus estimate of $1,731 million. The top line also increased 3% year over year. The upside can be attributed to increase in company sales.

McDonald's Corporation MCD reported fourth-quarter 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. The company reported adjusted earnings of $1.70 per share, which lagged the Zacks Consensus Estimate of $1.75. Moreover, the bottom line declined 14% year over year. Quarterly revenues of $5,313.8 million missed the Zacks Consensus Estimate of $5,320 million. The top line declined 2% year over year. The downside was due to the coronavirus pandemic.

Starbucks Corporation SBUX reported mixed first-quarter fiscal 2021 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. The company reported adjusted earnings per share (EPS) of 61 cents, which outpaced the Zacks Consensus Estimate of 55 cents. In the prior-year quarter, the company had reported adjusted EPS of 79 cents. Meanwhile, quarterly revenues of $6,749.4 million missed the Zacks Consensus Estimate of $6,873 million. Moreover, the top line fell 4.9% from the year-ago quarter’s levels. The downside was due to dismal global retail and comparable sales, and decline in store traffic.

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