Yahoo Finance Red Robin (RRGB) Rides on Solid Comps Growth Amid High Costs
Red Robin Gourmet Burgers, Inc. RRGB is benefiting from solid comparable restaurant revenue growth, courtesy of increased guest check-in, strategic initiatives as well as menu innovation and improved pricing.
Recently, RRGB reported impressive first-quarter fiscal 2023 results, with earnings and revenues beating the Zacks Consensus Estimate by 140.3% and 3.1%, respectively. Also, the top and bottom lines grew year over year by 5.7% and 108.3%, respectively. The upside was attributable to menu price increases, favorable sales channel mix and growth in restaurant traffic.
The Zacks Consensus Estimate for fiscal 2023 has narrowed to a loss of $1.53 per share from $1.75 per share over the past 30 days. This depicts analysts' optimism over the company’s growth prospects.
However, this casual dining restaurant chain is facing headwinds in the form of increased commodity inflation and other operating costs that are hurting its margins.
Factors In Favor of RRGB
Red Robin continues to impress investors with solid comps growth. In first-quarter fiscal 2023, comparable restaurant revenues rose 8.6% year over year, mainly driven by an 8% rise in guest checks. The rise in guest checks can be attributed to a 7.2% increase in pricing and a 0.8% improvement in menu mix.
RRGB’s focus on upgrading its cooking techniques to a more traditional flat-top cooking method bodes well. So far, the company has enabled the flat-top cooking method in 300 restaurants and anticipates full deployment across its system by the second quarter of fiscal 2023.
The company also continues to focus on menu innovation to drive growth. During the first quarter of fiscal 2023, the company reported developments with respect to new entrees and non-fried appetizers. The company remains optimistic in this regard and anticipates rolling out the upgrades in October 2023.
Red Robin continues to focus on three areas — revenue growth, expense management and efficient capital deployment — to drive profitability. On Jan 9, 2023, the company launched its North Star five-point plan to help it drive long-term shareholder value and enhance its competitive positioning in the market. The plan focuses on an operations-focused restaurant company, enhancement of customer experience and engagement, reduction in costs along with growth in comparable restaurant revenue and unit-level profitability. The company anticipates the plan to drive growth in 2023 and beyond.
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Shares of Red Robin have surged 125.1% in the year-to-date period compared with the Zacks Retail - Restaurants industry’s growth of 9.5%.
Headwinds
Red Robin has been witnessing rising costs and expenses in recent quarters. During the first quarter of fiscal 2023, cost of sales rose 9.6% year over year to $99.7 million, while as a percentage of restaurant revenues, the metric increased 60 basis points to 24.5%. The increase was primarily due to commodity inflation.
Also, the company reported higher costs on account of equipment repairs and maintenance costs, restaurant supplies, utilities, restaurant technology, and other miscellaneous costs. For fiscal 2023, the company anticipates commodity and labor inflation to be in the mid-to-high single-digit range.
Zacks Rank & Key Picks
Red Robin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks from the Zacks Retail-Wholesale sector include Yum China Holdings, Inc. YUMC, Chipotle Mexican Grill, Inc. CMG and Chuy's Holdings, Inc. CHUY.
Yum China currently sports a Zacks Rank #1. YUMC has a trailing four-quarter earnings surprise of 301.6%, on average. Shares of the company have gained 27.1% in the past year.
The Zacks Consensus Estimate for YUMC’s 2023 sales and EPS suggests growth of 19.7% and 89.5%, respectively, from the year-ago period’s levels.
Chipotle sports a Zacks Rank #1. CMG has a trailing four-quarter earnings surprise of 4.7%, on average. The shares of the company have risen 49.9% in the past year.
The Zacks Consensus Estimate for CMG’s 2023 sales and EPS suggests growth of 14% and 33.9%, respectively, from the year-ago period’s levels.
Chuy's Holdings carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of the company have increased 80.9% in the past year.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 9.9% and 24.8%, respectively, from the year-ago period’s levels.
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Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
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