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Red Robin (RRGB) Stock Down on Q3 Earnings & Revenues Miss

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  • RRGB
  • CAKE

Red Robin Gourmet Burgers, Inc. RRGB reported third-quarter fiscal 2021 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. Following the results, the company’s shares declined nearly 4% in the after-hour trading session on Nov 11.

In this regard, Paul J. B. Murphy III, Red Robin’s president and CEO, said, "Our confidence is strengthened by the positive trajectory in our sales and traffic trends over the past eight weeks, despite softness earlier in the third quarter due to concerns about the Delta variant and continued staffing and supply chain challenges.”

The company announced that it is likely to launch two fresh mobile apps — iOS and Android, a new website ordering experience and a new loyalty platform before the end of 2021. This is likely to drive traffic and average guest checks.

Earnings & Revenue Discussion

During the fiscal third quarter, Red Robin reported an adjusted loss per share of 88 cents, wider than the Zacks Consensus Estimate of a loss of 45 cents. In the year-ago quarter, the company had reported an adjusted loss of $19 cents.

Quarterly revenues of $275.4 million lagged the consensus mark of $278 million. However, the top line improved 37.4% year over year. The company benefited from increased guest traffic due to lifting of jurisdictional indoor dining restrictions.

During the quarter under review, comparable restaurant revenues surged 34.3% year over year. The upside was primarily driven by 22.5% rise in guest count and 11.8% increase in average guest checks. The increase in average guest check can be attributed to a 3.5% rise in pricing and 8.4% rise in menu mix, which was marginally offset by a decrease of 0.1% due to higher discounts. Menu mix, during the fiscal third quarter, gained from higher sales of beverages and limited time menu offerings.

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

Operating Results

Restaurant-level operating profit margin was 12.5% for the fiscal third quarter compared with 8.6% reported in the prior-year quarter.

During the fiscal third quarter, restaurant labor costs (as a percentage of restaurant revenues) declined 80 bps year over year to 36.9%. The downside was primarily due to staffing shortages and sales leverage. However, this was partially offset by higher wage rates, staffing costs and increased restaurant management compensation costs. Additionally, Red Robin incurred $3.1 million transitory labor and other operating costs in the fiscal third quarter due to staffing issues.

Meanwhile, other operating costs declined 10 bps year over year to 19%. During the quarter under review, cost of sales declined 20 bps year over year to 23.2%. Occupancy costs fell 290 bps year over year to 8.3%. The decrease was primarily due to 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 the fiscal third quarter amounted to $8.2 million against a loss of $0.7 million in the year-ago quarter.

Other Financial Information

As of Oct 3, 2021, Red Robin had cash and cash equivalents of $17.8 million compared with $25.6 million as of Jul, 2021 and $16.1 million as of Dec 27, 2020. Long-term debt as of Oct 3, 2021 stood at $147.5 million compared with $145.1 million as of Jul, 2021 and $161 million as of Dec 27, 2020.

Inventories during the quarter were $23.8 million compared with $23.7 million as of Jul 11, 2021.

Guidance

Red Robin provided limited guidance. For 2021, the company continues to expect capital expenditures in the range of $45 million to $55 million. This includes investments related to restaurants, infrastructure and systems capital maintenance, digital guest, operational technology solutions and off-premises execution enhancements.

The company announced Donatos expansion to approximately 120 restaurants in 2021. It expects to open approximately 40 restaurants in the fourth quarter of fiscal 2021.

For 2021, the company expects selling, general and administrative costs in the range of $120 million to $130 million.

Red Robin currently carries a Zacks Rank #5 (Strong Sell).

Peer Releases

Papa John’s International, Inc. PZZA reported robust third-quarter fiscal 2021 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. During the fiscal third quarter, the company reported adjusted earnings of 83 cents per share, which surpassed the Zacks Consensus Estimate of 69 cents by 20.3%. The bottom line surged 137.1% from 35 cents in the prior-year quarter. Quarterly revenues of $512.8 million beat the consensus mark of $501 million by 2.3%. The top line increased 8.4% on a year-over-year basis.

Papa John’s benefited from solid comparable sales in North America on account of strong customer retention and innovation strategies. The company witnessed a rise in company-owned restaurant revenues, franchise royalties and commissary sales. International revenues benefited from higher franchise royalties and unit growth. This Zacks Rank #2 (Buy) company’s shares have gained 35.5% in the past three months compared with the industry’s growth of 5.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Cheesecake Factory Incorporated CAKE reported third-quarter fiscal 2021 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. In the quarter under review, adjusted earnings per share (EPS) was 65 cents, which lagged the Zacks Consensus Estimate of 70 cents. In the prior-year quarter, the company had reported an adjusted loss of 33 cents per share. The upside was primarily driven by improvements in labor and other operating expenses.

Cheesecake Factory gained from solid off-premise sales growth. Quarter-to-date (through Nov 2), the off-premise model contributed 28% to total sales. Off-premise average weekly sales have doubled compared with fiscal 2019 levels. Shares of Cheesecake Factory have declined 21.3% in the past six months, against the industry’s growth of 5.7%. Cheesecake Factory carries a Zacks Rank #4 (Sell).

YUM! Brands, Inc. YUM reported strong third-quarter 2021 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Both the metrics improved year over year. During third-quarter 2021, the company’s adjusted earnings of $1.22 beat the Zacks Consensus Estimate of $1.06. In the prior-year quarter, the company had reported adjusted earnings of $1.01. Quarterly revenues of $1,606 million outpaced the consensus mark of $1,584 million. The top line improved 11% year over year.

YUM! Brands’ results in the quarter benefited from strong digital sales, robust unit development and a diversified global business model. The company strengthened its digital capabilities with the acquisition of Dragontail, which provides AI-based integrated kitchen order management and delivery technologies. The initiative paves the path for strengthening store operations and enhancing customer experience. During the third quarter, it reported digital sales of more than $5 billion. Shares of this Zacks Rank #3 (Hold) company have gained 8.2% in the past six months.


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