Why Is Red Robin (RRGB) Down 4.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Red Robin (RRGB). Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Red Robin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Red Robin’s Q3 Earnings Beat, Adjusted EBITDA Up Y/Y
Red Robin reported mixed third-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line improved on a year-over-year basis, but the bottom line declined.
Delving Deeper
In the fiscal third quarter, Red Robin recorded an adjusted loss per share of 79 cents, surpassing the Zacks Consensus Estimate of a loss of 81 cents. The company reported an adjusted loss per share of $1.04 in the prior-year quarter.
Quarterly revenues of $277.6 million missed the consensus mark of $278.3 million. The top line declined 3.2% year over year. The downside was primarily caused by a decline in comps.
During the quarter under review, comparable restaurant revenues fell 3.4% year over year. The downside can be attributed to the shift away from deep discounting marketing promotions and the elimination of virtual brands. Also, the Guest count declined 10.4% during the quarter. However, this was partially offset by a 7% rise in guest checks. The rise in guest checks can be attributed to a 7.7% increase in menu prices and a 2.1% increase in discounts. However, this was partially offset by a 2.8% decline in the menu mix. Per our model, comparable restaurant revenues were anticipated to decline 1.4% year over year.
Operating Results
The restaurant-level operating profit margin was 11.1% in the fiscal third quarter (compared with 12.6% reported in the prior-year quarter). The figure compares to our projection of 11.7%.
During the fiscal third quarter, restaurant labor costs increased 3.2% year over year to $103.7 million. The figure compares to our projection of $99.5 million. Restaurant labor costs (as a percentage of restaurant revenues) increased 240 basis points (bps) year over year to 38%.
Meanwhile, other operating costs during the quarter declined 4.7% year over year to $50.4 million. The figure compares to our projection of $52.8 million. Other operating costs (as a percentage of restaurant revenues) declined 30 bps year over year to 18.4%.
During the quarter under review, the cost of sales (as a percentage of restaurant revenues) fell 120 bps year over year to 23.8%. Occupancy costs (as a percentage of restaurant revenues) increased 50 bps year over year to 8.6%.
Adjusted earnings before interest expenses, income taxes, depreciation and amortization (EBITDA) during the fiscal third quarter amounted to $6.8 million (compared with $3.9 million reported in the prior year quarter). Our estimate for the metric was $9.2 million.
Other Financial Information
As of Oct 1, 2023, Red Robin had cash and cash equivalents of $48.6 million compared with $44 million as of Jul 9, 2023. Long-term debt as of Oct 1, 2023, was $182.1 million compared with $188.1 in the previous quarter. Inventories during the quarter were $27 million compared with $26.9 million reported in the previous quarter.
2023 Guidance
For 2023, the company expects total revenues to be at least $1.3 billion. Restaurant-level operating profit is anticipated to be in the range of 13-13.5% compared with the previous expectation of at least 13.5%. The company expects 2023 Comparable Restaurant Revenue to grow in the range of 1-3% year over year.
The selling, general and administrative costs are expected in the range of $123-$127 million compared with the previous expectation of $127-$132 million. Capital expenditures are anticipated to be between $45 million and $50 million.
In 2023, adjusted EBITDA is expected in the range of $72.5-$77.5 million compared with the previous anticipation of $72.5-$82.5 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 10.35% due to these changes.
VGM Scores
Currently, Red Robin has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Red Robin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
