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Red Robin (RRGB) Stock Down on Wider-Than-Expected Q2 Loss

Zacks Equity Research

Red Robin Gourmet Burgers, Inc. RRGB reported second-quarter fiscal 2020 results, wherein the bottom line missed the Zacks Consensus Estimate while revenues beat the same. However, the top and the bottom line declined on a year-over-year basis. Following the results, shares of the company declined 9.2% during after-hour trading session on Aug 11.

The company reported adjusted loss per share of $3.31, wider than the Zacks Consensus Estimate of a loss of $2.97. In the year-ago quarter, the company had reported adjusted earnings of $1.03.

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 $160.1 million surpassed the consensus mark of $159.8 million by 1%. However, the top line declined 47.7% year over year due to limited dining room capacity operations at re-opened restaurants and operating off-premise only at restaurants with closed dining rooms, resulting in lower sales of beverages and burgers.

Comparable restaurant revenues declined 41.4% year over year owing to a 38.5% fall in guest count and a 2.9% decrease in average guest check. The decline in average guest check can be attributed to a 5.7% fall in menu mix, partially offset by a 2.2% increase in pricing and 0.6% rise owing to lower discounting. Guest count in the quarter was hurt by a decline of 36.2% owing to the pandemic.

Operating Results

Restaurant-level operating profit margin came in at 2% for the fiscal second quarter compared with 18.2% in the year-ago period.

Restaurant labor costs (as a percentage of restaurant revenue) rose 400 basis points (bps) year over year to 39.2% in the fiscal second quarter. The increase was primarily driven by sales deleverage and higher wage rates, partially offset by lower restaurant manager incentive compensation.

Other restaurant operating costs increased 730 bps year over year to 21.6%. The increase was primarily driven by rise in third-party delivery fees owing to higher off-premise sales volumes and sales deleverage impacts on restaurant supply, utility, and technology costs. However, this was partially offset by a decrease in restaurant maintenance costs.

Cost of sales rose 30 bps year over year to 24.2%. The increase was primarily attributed to rise in beef prices, partially offset by discounts and lower waste. Occupancy costs increased 460 bps year over year to 13% due to sales deleverage impacts on rent expenses and other real estate costs.

Adjusted earnings before interest, taxes and amortization came in at ($15.3) million against earnings of $25.5 million reported in the year-ago quarter.

Other Financial Information

As of Jul 12, 2020, the company had cash and cash equivalents of $26.1 million compared with $30 million at the end of Dec 29, 2019. Inventories in the reported quarter declined 5.5% to $24.9 million. As of Jul 12, 2020, its long-term debt was $197.8 million compared with $206.9 million as on Dec 29, 2019.

Zacks Rank & Other Key Picks

Red Robin currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other top-ranked stocks in the same space include Jack in the Box Inc. JACK, Papa John's International, Inc. PZZA and El Pollo Loco Holdings, Inc. LOCO. Jack in the Box sports a Zacks Rank #1, while Papa John's and El Pollo Loco carry a Zacks Rank #2.

Jack in the Box has a three-five year earnings per share growth rate of 10.6%.

Earnings in 2021 for Papa John's are expected to surge 64.8%.

El Pollo Loco has a trailing four-quarter earnings surprise of 94.1%, on average.

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Jack In The Box Inc. (JACK) : Free Stock Analysis Report
 
Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
 
Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
 
El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
 
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