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BJ's Restaurants (BJRI) Banks On Off-premise Business, Costs High
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BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from its off-premise business, expansion efforts and Brewhouse Beer Club services. Also, focus on remodeling initiatives bodes well. However, a decline in traffic from pre-pandemic levels and a rise in food and labor costs are a concern.
Let us discuss the factors that highlight why investors should hold on to the stock for the time being.
Factors Driving Growth
The company’s off-premise operations continue to be a driving factor for overall sales. In 2021, average weekly off-premise sales stood at approximately $20,000 per restaurant, reflecting twice the growth from that of pre-pandemic levels. The company stated that the momentum continued in 2022 as well. The company is working on several initiatives to boost its off-premise experience. During the first quarter of fiscal 2022, the company made progress for improveming printed labels to ensure accurate filling of orders. Also, it emphasized on the rollout of an advanced order tracker (with real-time progress information) to complement the text message alerts. Given the focus on reducing friction throughout the guest experience and optimizing all channels, including takeout, curbside pickup, and delivery, the initiatives are likely to drive growth in the upcoming periods.
The company is striving to increase its new restaurant openings to achieve a minimum of 5% increase in operating weeks and derive high single digits revenue growth over the longer term. During the fiscal first quarter, the company opened a new restaurant in Charlotte, NC. It also opened a new restaurant in San Antonio, TX. The company reported solid performance with respect to the openings. Going forward, the company plans to open eight new restaurants in fiscal 2022. It remains steadfast in its commitment to expand its presence to at least 425 restaurants domestically.
The company stated that it gained traction in its Beer Club subscription services in California. The company is witnessing high customer engagement on the back of new beer releases and program benefits. To drive incremental visits and spending in its restaurants, the company emphasized on creating a more iconic brewhouse signature food and drink menu items while elevating its high-quality ingredients and presentation. BJRI intends to optimize the program and expand its offering to additional states.
To boost sales from its dine-in services, the restaurant operator has initiated testing of new ideas and design features. During the first quarter of fiscal 2022, the company made solid progress with respect to its two pilot remodels concerning dining room capacity expansion and new design elements. The company added three new large booths for extra seating capacity and larger TVs to improve the dining experience. Backed by positive customer feedback and increased sales levels generated from the remodeled locations, the company remains optimistic and expects to proceed with this initiative in the upcoming periods.
Concerns
Image Source: Zacks Investment Research
In the past three months, shares of BJ’s Restaurants have declined 26.9% compared with the industry’s fall of 14.4%. The dismal performance can be primarily attributed to the coronavirus crisis. Although the company reopened most of its restaurants, the possibility of additional outbreaks can lead to lower capacity, social distancing and suspension of in-restaurant dining operations. Also, traffic is still low compared with pre-pandemic levels. Going forward, the company intends to monitor the situation regularly to gauge the impacts of COVID-19.
Moreover, the company is persistently bearing the brunt of higher expenses, which have been detrimental to margins. Pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on margins. In the fiscal first quarter, the company’s cost of sales as a percentage of revenues, came in at 27.3% compared with 25.1% reported in the prior-year quarter. The upside was primarily driven by the rise in food costs, partially mitigated by menu price increases. The company has also been facing high labor and benefit expenses. During the fiscal first quarter, labor and benefit expenses were $116.3 million compared with $81.7 million reported in the prior-year quarter.
Some better-ranked stocks in the same space are BBQ Holdings, Inc. , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Kura Sushi USA, Inc. (KRUS - Free Report) .
BBQ Holdings sports a Zacks Rank #1. BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have increased 16.1% in the past year.
The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and earnings per share (EPS) suggests growth of 40.9% and 67.6%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). Arcos Dorados has a long-term earnings growth of 31.3%. Shares of the company have risen 10.3% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 66.7%, respectively, from the year-ago period’s levels.
Kura Sushi carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 23.7%, on average. Shares of the company have risen 4.2% in the past year.
The Zacks Consensus Estimate for Kura Sushi’s 2022 sales and EPS suggests growth of 111.9% and 81.9%, respectively, from the year-ago period’s levels.
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BJ's Restaurants (BJRI) Banks On Off-premise Business, Costs High
BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from its off-premise business, expansion efforts and Brewhouse Beer Club services. Also, focus on remodeling initiatives bodes well. However, a decline in traffic from pre-pandemic levels and a rise in food and labor costs are a concern.
Let us discuss the factors that highlight why investors should hold on to the stock for the time being.
Factors Driving Growth
The company’s off-premise operations continue to be a driving factor for overall sales. In 2021, average weekly off-premise sales stood at approximately $20,000 per restaurant, reflecting twice the growth from that of pre-pandemic levels. The company stated that the momentum continued in 2022 as well. The company is working on several initiatives to boost its off-premise experience. During the first quarter of fiscal 2022, the company made progress for improveming printed labels to ensure accurate filling of orders. Also, it emphasized on the rollout of an advanced order tracker (with real-time progress information) to complement the text message alerts. Given the focus on reducing friction throughout the guest experience and optimizing all channels, including takeout, curbside pickup, and delivery, the initiatives are likely to drive growth in the upcoming periods.
The company is striving to increase its new restaurant openings to achieve a minimum of 5% increase in operating weeks and derive high single digits revenue growth over the longer term. During the fiscal first quarter, the company opened a new restaurant in Charlotte, NC. It also opened a new restaurant in San Antonio, TX. The company reported solid performance with respect to the openings. Going forward, the company plans to open eight new restaurants in fiscal 2022. It remains steadfast in its commitment to expand its presence to at least 425 restaurants domestically.
The company stated that it gained traction in its Beer Club subscription services in California. The company is witnessing high customer engagement on the back of new beer releases and program benefits. To drive incremental visits and spending in its restaurants, the company emphasized on creating a more iconic brewhouse signature food and drink menu items while elevating its high-quality ingredients and presentation. BJRI intends to optimize the program and expand its offering to additional states.
To boost sales from its dine-in services, the restaurant operator has initiated testing of new ideas and design features. During the first quarter of fiscal 2022, the company made solid progress with respect to its two pilot remodels concerning dining room capacity expansion and new design elements. The company added three new large booths for extra seating capacity and larger TVs to improve the dining experience. Backed by positive customer feedback and increased sales levels generated from the remodeled locations, the company remains optimistic and expects to proceed with this initiative in the upcoming periods.
Concerns
Image Source: Zacks Investment Research
In the past three months, shares of BJ’s Restaurants have declined 26.9% compared with the industry’s fall of 14.4%. The dismal performance can be primarily attributed to the coronavirus crisis. Although the company reopened most of its restaurants, the possibility of additional outbreaks can lead to lower capacity, social distancing and suspension of in-restaurant dining operations. Also, traffic is still low compared with pre-pandemic levels. Going forward, the company intends to monitor the situation regularly to gauge the impacts of COVID-19.
Moreover, the company is persistently bearing the brunt of higher expenses, which have been detrimental to margins. Pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on margins. In the fiscal first quarter, the company’s cost of sales as a percentage of revenues, came in at 27.3% compared with 25.1% reported in the prior-year quarter. The upside was primarily driven by the rise in food costs, partially mitigated by menu price increases. The company has also been facing high labor and benefit expenses. During the fiscal first quarter, labor and benefit expenses were $116.3 million compared with $81.7 million reported in the prior-year 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 are BBQ Holdings, Inc. , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Kura Sushi USA, Inc. (KRUS - Free Report) .
BBQ Holdings sports a Zacks Rank #1. BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have increased 16.1% in the past year.
The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and earnings per share (EPS) suggests growth of 40.9% and 67.6%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). Arcos Dorados has a long-term earnings growth of 31.3%. Shares of the company have risen 10.3% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 66.7%, respectively, from the year-ago period’s levels.
Kura Sushi carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 23.7%, on average. Shares of the company have risen 4.2% in the past year.
The Zacks Consensus Estimate for Kura Sushi’s 2022 sales and EPS suggests growth of 111.9% and 81.9%, respectively, from the year-ago period’s levels.