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BJ's Restaurants Upped to Strong Buy

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On Jul 5, Zacks Investment Research upgraded BJ's Restaurants, Inc. (BJRI - Free Report) to a Zacks Rank #1 (Strong Buy). BJ's Restaurants’ new mobile app – launched last month – and improving guest traffic at its restaurants due to FIFA World Cup are the main drivers of our decision. Further, shares of BJ's Restaurants rose nearly 10% in the past 30 days.

Why the Upgrade?

On June 10, the company launched its mobile app to combat declining comps, which declined 2.9% in the last quarter. The app is designed to save customers’ time and money while making BJ's Restaurants’ operations easier and more efficient.

The app allows guests to order, move up in queue for a table and pay without waiting for the check. There is also a preferred wait-list for customers to see how long they have to wait. Further, app users will automatically receive BJ's Premier Awards, which can be redeemed at the restaurants for free food and additional savings or rewards.

Additionally, the summer months are typically a weak period in terms of sports action for bars and restaurants. However, with the FIFA World Cup, BJ's Restaurants has managed to counter the weak summer period by drawing larger crowds to its outlets.

In fact, the restaurateur has been able to better manage the traffic, especially during peak hours, with the help of it’s newly launched app. We believe this is good news for the California-based restaurateur as same-store sales grew in the usually slow summer months which should subsequently boost earnings in the upcoming quarter.

Further, we are also encouraged by the company’s decision to launch its smaller prototype restaurants (which requires lower investments) in various markets. In 2014, BJ's Restaurants plans to open 11 new restaurants and all of them will be based on the new restaurant design.

In our view, with commodity costs staying at an all time high, lower investment by the company will be beneficial to its margins. And the fact that the company is focusing on its expansion plans without sacrificing margins is laudable. In fact, we believe the smaller prototype restaurant will be the primary driver for the company’s long-term goal of a restaurant-level margin of 19%.

Other Stocks to Consider

The following companies with a favorable Zacks Rank that are worth considering include Red Robin Gourmet Burgers Inc. (RRGB - Free Report) , Citi Trends, Inc. and Christopher & Banks Corp. (CBK - Free Report) . All these stocks sport the same Zacks Rank as BJ’s Restaurants.

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