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Red Robin (RRGB) Stock Down as Q2 Earnings Miss Estimates

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Red Robin Gourmet Burgers, Inc. RRGB reported dismal second-quarter fiscal 2021 results, with earnings and revenues missing the Zacks Consensus Estimate. However, the top and the bottom line increased on a year-over-year basis.

Following the results, the company’s shares fell 7.8% during after-hours trading session on Aug 18. Negative investor sentiments were witnessed as management stated issues related to ongoing jurisdictional restrictions and challenging labor availability.

In this regard, Paul J. B. Murphy III, Red Robin’s president and chief executive officer, said, "While we have reasons to be optimistic about the recovery, overall performance in the second quarter was below our expectation.”

Earnings & Revenue Discussion

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

During fiscal second quarter, the company reported adjusted loss per share of 22 cents, missing the Zacks Consensus Estimate of earnings of 7 cents. In the year-ago quarter, the company had reported adjusted loss of $3.31.

Quarterly revenues of $277 million missed the consensus mark of $279 million by 0.8%. However, the top line surged 71.9% year over year. Notably, the company benefitted from increased guest traffic due to continued lifting of jurisdictional indoor dining restrictions.

During the quarter, comparable restaurant revenues increased 66.3% year over year. The upside was primarily driven by 47.7% rise in guest count and 18.6% increase in average guest check. The increase in average guest check can be attributed to a 3% rise in pricing, 14.9% rise in menu mix and 0.7% rise from lower discounts. Menu mix, during the quarter, benefitted from higher sales of beverages and appetizers, partially offset by lower gourmet burger mix.

Moreover, the company benefitted from its Donatos pizza offerings. During fiscal second quarter, Donatos pizza generated sales of $2.9 million dollars. It also outperformed the rest of the system offerings by 550 basis points (bps) compared with 2019 levels. Going forward, the company expects Donatos to be a long-term growth driver with anticipated annual pizza sales of more than $60 million and profitability greater than $25 million by 2023.

Operating Results

Restaurant-level operating profit margin came in at 15.7% for fiscal second quarter compared with 2% reported in the prior-year quarter.

During fiscal second quarter, restaurant labor costs (as a percentage of restaurant revenues) declined 280 bps year over year to 36.4%. The downside was primarily caused by staffing shortages and sales leverage. However, this was partially offset by higher wage rates, staffing costs and increased restaurant management compensation costs. Additionally, the company incurred $1.6 million of incremental labor costs, owing to a rise in hiring and training resources, hiring ads as well as retention and sign-on bonuses to support staffing initiatives.

Meanwhile, other operating costs declined 440 bps year over year to 17.2%. The downside was primarily driven by a fall in third-party delivery fees and supplies owing to lower off-premises sales volume as well as sales leverage.

During the quarter, cost of sales declined 140 bps year over year to 22.8%. Occupancy costs declined 510 bps year over year to 7.9%. The decrease was primarily driven by savings from permanently-closed restaurants, restructuring of lease payments, rent concessions and sales leverage.

Adjusted earnings before interest expenses, income taxes, depreciation and amortization during fiscal second quarter came in at $19 million against a loss of $15.3 million reported in the year-ago quarter.

Other Financial Information

As of Jul 11, 2021, the company had cash and cash equivalents of $25.6 million compared with $22.3 million as of Apr 18, 2021 and $16.1 million as of Dec 27, 2020. Long-term debt as of Jul 11, 2021 stood at $145.1 million compared with $154.5 million as of Apr 18, 2021 and $161 million as of Dec 27, 2020.

Inventories during the quarter came in at $23.9 million compared with $23.8 million as of December-end.

Guidance

For 2021, the company expects capital expenditures in the range of $45-$55 million. This includes investments related to restaurants, infrastructure and systems capital maintenance, digital guest, operational technology solutions as well as off-premises execution enhancements.

The company announced Donatos expansion to approximately 120 restaurants in 2021. It expects to open approximately 80 restaurants in the second half of fiscal 2021.

For 2021, the company expects selling, general and administrative costs in the range of $125-$135 million. Meanwhile, effective tax benefit for 2021 is anticipated between 1% and 5%.

Zacks Rank & Peer Releases

Red Robin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BJ's Restaurants, Inc. BJRI reported second-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics increased year over year. The company’s adjusted earnings per share (EPS) of 26 cents beat the Zacks Consensus Estimate of 16 cents. In the prior-year quarter, the company had reported adjusted loss of 99 cents per share. Quarterly revenues of $290.3 million surpassed the consensus estimate of $285 million. The top line also rallied 126.7% year over year. The upside can be primarily attributed to the lifting of capacity and social distancing restrictions, thereby resulting in enhanced dining room capacity.

McDonald's Corporation MCD reported second-quarter 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics increased year over year. The company reported adjusted EPS of $2.37, which surpassed the Zacks Consensus Estimate of $2.12. Moreover, the bottom line rose 259.1% year over year. Quarterly revenues of $5,887.9 million beat the Zacks Consensus Estimate of $5,629 million. The figure rose 56.5% year over year. The top line benefited from increase in global comparable sales.

Starbucks Corporation SBUX reported solid third-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics increased year over year. The company reported adjusted EPS of $1.01, which beat the Zacks Consensus Estimate of 77 cents. In the prior-year quarter, the company had reported adjusted loss per share of 46 cents. Quarterly revenues of $7,496.5 million missed the Zacks Consensus Estimate of $7,243 million. The top line increased 77.6% from the year-ago quarter’s levels. The uptick was driven by growth in comparable store sales.


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