For Immediate Release
Chicago, IL –August 16, 2017 – Today, Zacks Equity Research discusses the Industry: Restaurants, Part 2, including Chipotle Mexican Grill, Inc. (NYSE:CMG – Free Report), Jack in the Box Inc. (NASDAQ:JACK – Free Report), Brinker International, Inc. (NYSE: EAT – Free Report), Red Robin Gourmet Burgers Inc. (NASDAQ:RRGB – Free Report) andStarbucks Corp. (NASDAQ:SBUX – Free Report).
Industry: Restaurants, Part 2
According to the National Restaurant Association, 2017 is set to be the eighth consecutive year of real sales growth in the restaurant industry. Notably, the industry’s sales account for 4% of the U.S. GDP. Amid all the talks of restaurant recession, strong sales and digital initiatives undertaken by restaurateurs to counter comps and traffic issues along with improving economic indicators in the U.S. should bring some relief.
Taking the past trends and long-term growth prospects of the industry into account, we highlight a few positives of investing in the restaurant space:
Various Sales Building Strategies: In order to navigate a challenging sales environment, restaurant operators are continually striving to innovate on the menu front to cater to the ever-changing palates of customers and entice them once again. Some of the notable restaurateurs playing this card are Chipotle Mexican Grill, Inc. (NYSE:(CMG - Free Report) – Free Report) and Jack in the Box Inc. (NASDAQ:JACK – Free Report).
Another initiative undertaken by the food chains is re-imaging of stores, which has received overwhelming response from guests. Brinker International, Inc. (NYSE: (EAT - Free Report) – Free Report), and Red Robin Gourmet Burgers Inc. (NASDAQ:RRGB – Free Report) have been working on these lines. Notably, reimaging of stores helps to create an appealing and differentiated concept that helps to boost the brand as well as improve client experience.
Meanwhile, restaurant companies like Starbucks Corp. (NASDAQ:SBUX – Free Report) offer loyalty programs at their outlets to enhance value dining. The companies engage its guests through these programs with offers designed to increase frequency of visits. Loyalty programs thus help retain old diners while bringing in new ones, thereby driving traffic.
On the other hand, other industry players are rolling out prototypes and smaller restaurant chains to augment value and drive traffic. This in turn will lower construction and occupancy costs but boost return on invested capital. Notably, smaller prototypes also accelerate growth in non-traditional locations.
Increased Focus on Modern Technology, Digital Ordering: The digital wave has hit the U.S. restaurant space as an increasing number of restaurateurs are deploying technology to enhance guest experience. The companies’ online and digital marketing activities have thus increased significantly over the past several years in response to increasing use of online and mobile web technology.
While smartphone apps attract consumers, video menu boards in quick-service restaurants and tabletop devices speed up sales and ensure convenience. Further, restaurant operators rely on social media for promotions and incorporate online review sites,social mediaand blogs aggressively into their marketing mix.
Domino's continues to add to its digital capabilities with the launch of various ordering apps and platforms which should boost digital orders. The extended ways to order a pizza has in fact kept Domino’s in the forefront of digital ordering and customer convenience.
Meanwhile, Chipotle is moving aggressively to make digital ordering more appealing to its customers in order to drive digital sales and lure customers. In this regard, it recently completed the rollout of its “Smarter Pickup Times” technology at all its restaurants that offer digital ordering.
Zacks Industry Rank
Within the Zacks Industry classification, health insurers are broadly grouped in the Medical sector (one of the 16 Zacks sectors).
We rank 265 industries into 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. We put our X industries into two groups: the top half (industries with the best average Zacks Rank) and the bottom half (the industries with the worst average Zacks Rank).
Over the last 10 years, using a one-week rebalance, the top half beat the bottom half by more than twice as much. The Zacks Industry Rank is #177 (bottom 34%). The ranking is available on the Zacks Industry Rank page.
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