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BJ's Restaurants Banks on Off-Premise Services, Costs High
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BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from off-premise services and digitization efforts. Also, increased focus on capacity expansion efforts bodes well. In the past three months, shares of the company have surged 38.5% compared with the Zacks Retail - Restaurants industry’s 8.5% growth. However, rise in operating expenses along with coronavirus-related woes is concerning.
Let us delve deeper into factors highlighting why investors should hold on to the stock for the time being.
Factors Driving Growth
BJ’s Restaurants has implemented several sales-building initiatives, which have contributed to the company’s performance over the past few weeks. Even though the company has reopened majority of its dining rooms with limited capacity, its off-premise operations continue to be a driving factor for overall sales. During the third quarter, the company added individually portioned group meals to its catering line-up. This along with its expanded family feast and bundle offerings has been a major contributor to off-premise sales. Notably, off-premise sales during the quarter were in the range of $23,000 to $25,000 per week.
Apart from this, the company is investing in technology-driven initiatives like digital ordering to boost sales. Also, productivity-improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line. The company continues to drive awareness in its key markets through greater and more targeted marketing.
Nonetheless, the company’s app and digital platforms are allowing it to offer promotions more effectively and efficiently. To this extent, it has rolled out several digital initiatives like digitized check-ins, menus and payment options to attract customers.
Meanwhile, to boost sales from its dine-in services, the company has implemented glass partitions in its dining rooms to expand seating capacity. It has also initiated construction of outside dining spaces in nearly half of its restaurants. Notably, the company expects the changes to be implemented at approximately 170 restaurants by mid-November 2020. Moreover, in California, Texas, Florida, Arizona and Nevada, the company added heaters and breathable panels to its outdoor dining spaces to support extended seating. Also, the company has begun testing of its beer subscription service in a group of Northern California restaurants. Backed by positive customer feedback, the service is likely to drive in-restaurant frequency, thereby boosting sales.
Concerns
The coronavirus outbreak has rattled the Retail - Restaurants industry, and BJ’s Restaurants has also not been spared. Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to the social-distancing protocols. Given the rise in COVID-19 cases along with associated capacity restrictions, the company expects the upcoming quarter results to be negatively impacted.
Moreover, the company has been continuously shouldering increased expenses, which have been detrimental to margins. Higher marketing expenses and costs related to sales-boosting initiatives are weighing on margins. The company is also facing high general and administrative expenses.
During the fiscal third quarter, occupancy and operating costs (as a percentage of sales) were 28.4%, up 510 basis points (bps) year over year. General and administrative expenses increased 260 bps to 7.7% in the quarter.
Some better-ranked stocks in the same space include Brinker International, Inc. (EAT - Free Report) , Del Taco Restaurants, Inc. and Fiesta Restaurant Group, Inc. . Brinker sports a Zacks Rank #1, while Del Taco and Fiesta Restaurant carry a Zacks Rank #2 (Buy).
Brinker has a trailing four-quarter earnings surprise of 116.6%, on average.
Del Taco and Fiesta Restaurant’s earnings in 2021 are expected to surge 41.4% and 418.8%, respectively.
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Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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BJ's Restaurants Banks on Off-Premise Services, Costs High
BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from off-premise services and digitization efforts. Also, increased focus on capacity expansion efforts bodes well. In the past three months, shares of the company have surged 38.5% compared with the Zacks Retail - Restaurants industry’s 8.5% growth. However, rise in operating expenses along with coronavirus-related woes is concerning.
Let us delve deeper into factors highlighting why investors should hold on to the stock for the time being.
Factors Driving Growth
BJ’s Restaurants has implemented several sales-building initiatives, which have contributed to the company’s performance over the past few weeks. Even though the company has reopened majority of its dining rooms with limited capacity, its off-premise operations continue to be a driving factor for overall sales. During the third quarter, the company added individually portioned group meals to its catering line-up. This along with its expanded family feast and bundle offerings has been a major contributor to off-premise sales. Notably, off-premise sales during the quarter were in the range of $23,000 to $25,000 per week.
Apart from this, the company is investing in technology-driven initiatives like digital ordering to boost sales. Also, productivity-improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line. The company continues to drive awareness in its key markets through greater and more targeted marketing.
Nonetheless, the company’s app and digital platforms are allowing it to offer promotions more effectively and efficiently. To this extent, it has rolled out several digital initiatives like digitized check-ins, menus and payment options to attract customers.
Meanwhile, to boost sales from its dine-in services, the company has implemented glass partitions in its dining rooms to expand seating capacity. It has also initiated construction of outside dining spaces in nearly half of its restaurants. Notably, the company expects the changes to be implemented at approximately 170 restaurants by mid-November 2020. Moreover, in California, Texas, Florida, Arizona and Nevada, the company added heaters and breathable panels to its outdoor dining spaces to support extended seating. Also, the company has begun testing of its beer subscription service in a group of Northern California restaurants. Backed by positive customer feedback, the service is likely to drive in-restaurant frequency, thereby boosting sales.
Concerns
The coronavirus outbreak has rattled the Retail - Restaurants industry, and BJ’s Restaurants has also not been spared. Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to the social-distancing protocols. Given the rise in COVID-19 cases along with associated capacity restrictions, the company expects the upcoming quarter results to be negatively impacted.
Moreover, the company has been continuously shouldering increased expenses, which have been detrimental to margins. Higher marketing expenses and costs related to sales-boosting initiatives are weighing on margins. The company is also facing high general and administrative expenses.
During the fiscal third quarter, occupancy and operating costs (as a percentage of sales) were 28.4%, up 510 basis points (bps) year over year. General and administrative expenses increased 260 bps to 7.7% in the quarter.
Zacks Rank & Key Picks
BJ’s Restaurants 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 in the same space include Brinker International, Inc. (EAT - Free Report) , Del Taco Restaurants, Inc. and Fiesta Restaurant Group, Inc. . Brinker sports a Zacks Rank #1, while Del Taco and Fiesta Restaurant carry a Zacks Rank #2 (Buy).
Brinker has a trailing four-quarter earnings surprise of 116.6%, on average.
Del Taco and Fiesta Restaurant’s earnings in 2021 are expected to surge 41.4% and 418.8%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>