Red Robin Reports Mixed 1Q - Analyst Blog
18 Maggio 2012 - 11:00AM
Zacks
Red Robin Gourmet Burgers
Inc.(RRGB) reported
earnings of 71 cents per share in the first quarter of 2012,
breezing past the Zacks Consensus Estimate of 66 cents as well as
the year-ago quarter adjusted earnings of 58 cents per share.
Results in the quarter benefited from cost improvement resulting in
margin expansion.
The company reported total revenue
of $299.5 million in the first quarter, up 4.4% year over year but
below the Zacks Consensus Estimate of $307.0 million.
Quarter
Highlights
During the quarter, restaurant
sales leaped 4.7% from the year-ago quarter to $294.6 million but
franchise royalties and fees revenue slipped 8.8% to $4.8
million.
Comparable restaurant sales inched
up 0.5% year over year at company-owned restaurants in the reported
quarter, driven by a 4.1% increase in average guest check,
partially offset by a 3.6% dip in guest count. The guest count
suffered due to the failure of its promotional activities and hefty
discounting environment.
Restaurant operating margin at
company-owned restaurants expanded 140 bps to 21.2%, due to a drop
of 90 bps in labor costs and a decline of 110 bps in other
operating costs, partially compensated by a 50 bps increase in food
and beverage cost and 20 bps hike in occupancy costs.
Selling, general and administrative
expenses in the quarter climbed 5.9% year over year to $32.0
million, due to higher equity-based compensation costs, new
information technology development costs and higher costs related
to gift card sales, partially offset by a decrease in severance
costs.
Financial
Aspects
Red Robin ended the quarter with
cash and cash equivalents of $38.0 million, total outstanding debt
of $137.9 million and shareholders’ equity of $308.5 million.
During the quarter, the company did not repurchase any shares, but
repaid $18.8 million of term loan.
Store Update
During the quarter, Red Robin
opened three full-size prototype restaurants and its second small
prototype restaurantRed Robin’s Burger Works. The company also
closed one company-owned restaurant during the first quarter.
Red Robin currently operates 466 restaurants, out of which 330 are
company owned and the rest franchised.
Outlook
In 2012, Red Robin expects comps to
grow 1% and restaurant operating margin to expand 20% year over
year, benefiting from lower operating costs and cost of sales.
In 2012, the casual dining
restaurant operator expects to open 13 new company owned
restaurants, including 4 additional Red Robin’s Burger Works.
Our Take
Red Robin’s Project RED initiative,
which focuses on revenue growth, expense control and capital
deployment is progressing quite well and going forward will
continue to focus on these areas to increase the profitability of
the company. We expect movement in estimates to remain unclear in
the coming days, as the company reported mixed results. The Zacks
Consensus Estimates for 2012 and 2013 stands at $1.88 and $2.18,
respectively.
However, we remain cautious on the
stock based on cost inflation, lower consumer spending and intense
competition from peers like Brinker International
inc. (EAT) and Domino's Pizza Inc.
(DPZ) with respect to price, service,
location and concept in order to drive traffic.
The company retains a Zacks #3
Rank, which translates into a short-term Hold rating. We also
have a long-term Neutral recommendation on the stock.
DOMINOS PIZZA (DPZ): Free Stock Analysis Report
BRINKER INTL (EAT): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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