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Red Robin's (RRGB) Q1 Earnings Lag Estimates, Stock Declines

Zacks Equity Research

Red Robin Gourmet Burgers, Inc. RRGB reported first-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate but revenues came almost in line with the same. However, both the metrics declined on a year-over-year basis.

Notably, the quarterly results were hurt by declining traffic numbers. Consequently, shares of Red Robin decreased 12.6% in the after-hours trading on May 30. In the past six months, the stock has lost 10.2% against the industry’s 7.4% growth.

Earnings & Revenue Discussion

Red Robin’s adjusted earnings of 19 cents per share missed the consensus estimate of 48 cents. The bottom line also declined 72.5% from the year-ago quarter number.

Revenues came in at $409.87 million, almost in line with the consensus mark of $409.9 million but declined 2.8% from the prior-year quarter. The downside can be primarily attributed to soft comparable restaurant revenues due to decline in dine-in traffic.

Additionally, comparable restaurant revenues decreased 3.3% year over year due to a 5.5% decline in guest count, which overshadowed a 2.2% gain in average check. The increase in average guest check was on account of a 0.3% rise in menu mix and 1.9% hike in pricing.

Operating Results

Restaurant-level operating profit margin contracted 170 basis points (bps) to 18.3%. The decline was due to a 60-bps rise in other restaurant operating expenses and 30-bps increase in occupancy costs. However, cost of sales margin declined 40 bps due to decrease in waste and lower Tavern mix. Also, labor costs margin increased 120 basis points due to higher average wage rates and sales deleverage.

Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased to $34.3 million from $42.4 million a year ago.

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

Financial Highlights

As of Apr 21, 2019, Red Robin had cash and cash equivalents of $23 million compared with $18.6 million as of Dec 30, 2018. The company’s long-term debt amounted to $183.4 million as of Apr 21, 2019, compared with $193.4 million as of Dec 30, 2018.

As of Apr 21, 2019, Red Robin had outstanding borrowings under its credit facility of $182.5 million in addition to amounts issued under letters of credit of $7.4 million.

Guidance

For 2019, Red Robin expects earnings of $1.14-$1.77 per share compared with $1.30-$1.70 projected earlier. The Zacks Consensus Estimate for the same is currently pegged at $1.23. Comparable restaurant revenue growth is expected to be down 1% to up 1% compared with prior guided range of flat to up 1%.

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

Stocks to Consider

Better-ranked stocks worth considering in the same space include Chipotle Mexican Grill, Inc. CMG, Yum China Holdings, Inc. YUMC and Denny's Corporation DENN, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chipotle Mexican Grill and Yum China’s long-term earnings are likely to witness 19.2% and 9.8% growth, respectively.

Denny's earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, the average beat being 8%.

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