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BJ's Restaurants (BJRI) Q3 Earnings, Sales Miss; Stock Down
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Shares of BJ’s Restaurants, Inc. (BJRI - Free Report) declined nearly 8% in afterhours trading on Oct 19, after the company reported lower-than-expected third-quarter fiscal 2016 results wherein both earnings and revenues lagged the Zacks Consensus Estimate.
Earnings and Revenue Discussion
Adjusted earnings of 30 cents per share missed the Zacks Consensus Estimate of 32 cents by 6.3%. Further, earnings decreased 23.1% from the year-ago figure of 39 cents mainly due to lower operating income margins.
Revenues of $233.7 million were up 1.9% year over year owing to new restaurant growth. However, revenues lagged the consensus mark of $239 million by 2.2%.
Inside the Headline Numbers
Comps in the quarter declined 3.4% compared with the prior-quarter comps decrease of 0.2% and the year-ago quarter comps growth of 2.3%. Despite menu innovation, the company’s comps declined mainly due to a challenging sales environment.
Further, the company outlined various macro factors which led to the comps decline, including the timing of the Summer Olympics as well as the current economic uncertainty arising from the presidential elections. Some of the comps softness is also the result of the company lapping its very strong prior-year quarter ‘Loaded Burger’ menu introduction.
Restaurant level margin was 17.7%, down 200 basis points (bps) year over year. Moreover, operating margin decreased 330 bps to 3.9%. A 110 bps and 30 bps increase in cost of sales and occupancy and operating costs as a percentage of sales, respectively, more than offset a 40 bps decline in general and administrative expenses.
The company has planned menu innovations and marketing initiatives for the rest of 2016 in order to drive sales. In this regard, BJ’s Restaurants will be introducing new center-of-the-plate holiday menu combinations during November and December.
In fact, in order to navigate the challenging macro environment, the company recently implemented a new menu format and introduced several new menu items focusing on the very successful ‘Enlightened Menu’ category featuring new ‘super food’ options.
Meanwhile, the company has reduced the number of planned fiscal 2017 restaurant openings to 10 to 15 compared with 17 restaurant openings this year, as the company believes that the sales headwinds in the industry call for greater focus on traffic and sales building initiatives.
However, the company expects sales headwinds in the near term because of social and political issues, increasing global uncertainty and weakening consumer confidence which is resulting in continued decline in traffic.
Wingstop posted positive earnings surprises in all of the last four quarters, with an average beat of 15.46%. Further, for full-year 2016, EPS is expected to grow 18.1%.
The Zacks Consensus Estimate for Darden’s 2016 earnings climbed 1.3% over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 9.32%.
Wendy’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 29.01%. Further, for full-year 2016, EPS is expected to grow 21.2%.
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BJ's Restaurants (BJRI) Q3 Earnings, Sales Miss; Stock Down
Shares of BJ’s Restaurants, Inc. (BJRI - Free Report) declined nearly 8% in afterhours trading on Oct 19, after the company reported lower-than-expected third-quarter fiscal 2016 results wherein both earnings and revenues lagged the Zacks Consensus Estimate.
Earnings and Revenue Discussion
Adjusted earnings of 30 cents per share missed the Zacks Consensus Estimate of 32 cents by 6.3%. Further, earnings decreased 23.1% from the year-ago figure of 39 cents mainly due to lower operating income margins.
Revenues of $233.7 million were up 1.9% year over year owing to new restaurant growth. However, revenues lagged the consensus mark of $239 million by 2.2%.
Inside the Headline Numbers
Comps in the quarter declined 3.4% compared with the prior-quarter comps decrease of 0.2% and the year-ago quarter comps growth of 2.3%. Despite menu innovation, the company’s comps declined mainly due to a challenging sales environment.
Further, the company outlined various macro factors which led to the comps decline, including the timing of the Summer Olympics as well as the current economic uncertainty arising from the presidential elections. Some of the comps softness is also the result of the company lapping its very strong prior-year quarter ‘Loaded Burger’ menu introduction.
Restaurant level margin was 17.7%, down 200 basis points (bps) year over year. Moreover, operating margin decreased 330 bps to 3.9%. A 110 bps and 30 bps increase in cost of sales and occupancy and operating costs as a percentage of sales, respectively, more than offset a 40 bps decline in general and administrative expenses.
BJ'S RESTAURANT Price, Consensus and EPS Surprise
BJ'S RESTAURANT Price, Consensus and EPS Surprise | BJ'S RESTAURANT Quote
Going Forward
The company has planned menu innovations and marketing initiatives for the rest of 2016 in order to drive sales. In this regard, BJ’s Restaurants will be introducing new center-of-the-plate holiday menu combinations during November and December.
In fact, in order to navigate the challenging macro environment, the company recently implemented a new menu format and introduced several new menu items focusing on the very successful ‘Enlightened Menu’ category featuring new ‘super food’ options.
Meanwhile, the company has reduced the number of planned fiscal 2017 restaurant openings to 10 to 15 compared with 17 restaurant openings this year, as the company believes that the sales headwinds in the industry call for greater focus on traffic and sales building initiatives.
However, the company expects sales headwinds in the near term because of social and political issues, increasing global uncertainty and weakening consumer confidence which is resulting in continued decline in traffic.
Zacks Rank & Stocks to Consider
BJ’s Restaurants has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Wingstop Inc. (WING - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) and The Wendy's Company (WEN - Free Report) . While Wingstop sports a Zacks Rank #1 (Strong Buy), Darden and Wendy's carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Wingstop posted positive earnings surprises in all of the last four quarters, with an average beat of 15.46%. Further, for full-year 2016, EPS is expected to grow 18.1%.
The Zacks Consensus Estimate for Darden’s 2016 earnings climbed 1.3% over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 9.32%.
Wendy’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 29.01%. Further, for full-year 2016, EPS is expected to grow 21.2%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>