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BJ's Restaurants (BJRI) Down 23% YTD: What's Hurting the Stock?
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Shares of BJ's Restaurants, Inc. (BJRI - Free Report) have declined 23.4% so far this year compared with the industry’s fall of 17%. The downside was primarily caused by inflationary pressures and supply chain challenges.
This Zacks Rank #5 (Strong Sell) company reported dismal second-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate. The company posted adjusted earnings per share (EPS) of 10 cents per share, missing the Zacks Consensus Estimate of 23 cents. In the year-ago quarter, BJRI reported an adjusted EPS of 26 cents a share.
In the past 60 days, earnings estimates for fiscal 2023 witnessed downward revisions of 3.4% to 84 cents per share. Let’s delve deeper and find out the factors hurting the company’s performance.
Primary Concerns
BJ's Restaurants’ performance has been affected by higher commodity and labor inflation, supply chain challenges, marketing expenses and costs related to sales-boosting initiatives.
Image Source: Zacks Investment Research
In the fiscal second quarter, the company’s cost of sales, as a percentage of revenues, came in at 27.6% compared with the 26% reported in the prior-year quarter. The upside was primarily driven by the rise in food costs (up 10% year over year), partially mitigated by menu price increases. During the quarter, food cost inflation was exacerbated by the war in Ukraine that drove gas prices and other input costs higher.
The company has also been facing high labor and benefit expenses. During the fiscal second quarter, labor and benefit expenses were $123.1 million compared with $104.2 million reported in the prior-year quarter. During the quarter, the restaurant-level operating margin came in at 11.9% compared with the 14.8% reported in the year-ago quarter.
BJ's Restaurants has been strategically increasing prices to mitigate the impact of inflation while maintaining a strong value proposition. The company considers measured and frequent pricing actions to limit the impact on guest traffic.
Although the company reopened most of its restaurants, 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.
High debt remains a concern for the company. Long-term debt, as of Jun 28, 2022, stood at $50 million flat quarter over quarter. The company ended the fiscal second quarter with cash and cash equivalent of $37.8 million compared with $27.2 million in the previous quarter.
Although the cash balance has improved sequentially, it may not be enough to manage the high debt level. The times-interest-earned ratio at the end of the fiscal second quarter came in at (5.9x) compared with (3.4x) reported in the previous quarter.
Yum China sports a Zacks Rank #1 (Strong Buy). Yum China has a long-term earnings growth of 10%. Shares of the company have increased by 5% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Yum China’s 2023 sales and earnings per share (EPS) suggests growth of 19.9% and 86.8%, respectively, from the year-ago period’s levels.
Sprouts Farmers Market carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 15.6%, on average. Shares of the company have increased 22% in the past year.
The Zacks Consensus Estimate for Sprouts Farmers Market’s 2023 sales and EPS suggests growth of 5.9% and 7.9%, respectively, from the year-ago period’s levels.
Wendy's carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 3.9%, on average. Shares of the company have declined 12.1% in the past year.
The Zacks Consensus Estimate for Wendy's 2022 sales and EPS suggests growth of 10.4% and 3.7%, respectively, from the year-ago period’s levels.
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BJ's Restaurants (BJRI) Down 23% YTD: What's Hurting the Stock?
Shares of BJ's Restaurants, Inc. (BJRI - Free Report) have declined 23.4% so far this year compared with the industry’s fall of 17%. The downside was primarily caused by inflationary pressures and supply chain challenges.
This Zacks Rank #5 (Strong Sell) company reported dismal second-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate. The company posted adjusted earnings per share (EPS) of 10 cents per share, missing the Zacks Consensus Estimate of 23 cents. In the year-ago quarter, BJRI reported an adjusted EPS of 26 cents a share.
In the past 60 days, earnings estimates for fiscal 2023 witnessed downward revisions of 3.4% to 84 cents per share. Let’s delve deeper and find out the factors hurting the company’s performance.
Primary Concerns
BJ's Restaurants’ performance has been affected by higher commodity and labor inflation, supply chain challenges, marketing expenses and costs related to sales-boosting initiatives.
Image Source: Zacks Investment Research
In the fiscal second quarter, the company’s cost of sales, as a percentage of revenues, came in at 27.6% compared with the 26% reported in the prior-year quarter. The upside was primarily driven by the rise in food costs (up 10% year over year), partially mitigated by menu price increases. During the quarter, food cost inflation was exacerbated by the war in Ukraine that drove gas prices and other input costs higher.
The company has also been facing high labor and benefit expenses. During the fiscal second quarter, labor and benefit expenses were $123.1 million compared with $104.2 million reported in the prior-year quarter. During the quarter, the restaurant-level operating margin came in at 11.9% compared with the 14.8% reported in the year-ago quarter.
BJ's Restaurants has been strategically increasing prices to mitigate the impact of inflation while maintaining a strong value proposition. The company considers measured and frequent pricing actions to limit the impact on guest traffic.
Although the company reopened most of its restaurants, 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.
High debt remains a concern for the company. Long-term debt, as of Jun 28, 2022, stood at $50 million flat quarter over quarter. The company ended the fiscal second quarter with cash and cash equivalent of $37.8 million compared with $27.2 million in the previous quarter.
Although the cash balance has improved sequentially, it may not be enough to manage the high debt level. The times-interest-earned ratio at the end of the fiscal second quarter came in at (5.9x) compared with (3.4x) reported in the previous quarter.
Key Picks
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Yum China Holdings, Inc. (YUMC - Free Report) , Sprouts Farmers Market, Inc. (SFM - Free Report) and The Wendy's Company (WEN - Free Report) .
Yum China sports a Zacks Rank #1 (Strong Buy). Yum China has a long-term earnings growth of 10%. Shares of the company have increased by 5% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Yum China’s 2023 sales and earnings per share (EPS) suggests growth of 19.9% and 86.8%, respectively, from the year-ago period’s levels.
Sprouts Farmers Market carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 15.6%, on average. Shares of the company have increased 22% in the past year.
The Zacks Consensus Estimate for Sprouts Farmers Market’s 2023 sales and EPS suggests growth of 5.9% and 7.9%, respectively, from the year-ago period’s levels.
Wendy's carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 3.9%, on average. Shares of the company have declined 12.1% in the past year.
The Zacks Consensus Estimate for Wendy's 2022 sales and EPS suggests growth of 10.4% and 3.7%, respectively, from the year-ago period’s levels.