Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) reported mixed third-quarter 2018 results, with earnings surpassing the Zacks Consensus Estimate but revenues lagging the same.
Though the bottom line declined in the quarter, the company is continuously trying to better manage labor and food costs to boost earnings.
Earnings & Revenue Discussion
Red Robin’s adjusted earnings of 16 cents per share surpassed the consensus estimate of 12 cents per share. However, the bottom line declined a sharp 23.8%
Revenues totaled $294.9 million, which lagged the consensus mark of $305 million and declined 3.5% from the prior-year quarter. The miss was primarily due to soft comparable restaurant revenues driven by decline in dine-in traffic.
Behind the Headline Numbers
Comparable restaurant revenues were down 3.4% year over year due to a 1.5% decline in average guest check and a 1.9% fall in guest count. The decline in average guest check resulted from a 3% decrease in menu mix, negated by a 1.5% hike in pricing.
Restaurant-level operating profit margin contracted 180 basis points (bps) to 16.8%. The decline was due to a 120-bps rise in other restaurant operating expenses and a 60-bps surge in occupancy costs. However, cost of sales remained flat at 23.8% due to increase in steak fries and the impact of higher Tavern mix, offset by decrease in ground beef and lower food waste. Labor costs also remained flat at 35.3% owing to improvement in labor productivity.
Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased 5.1% to $24.2 million from $25.5 million a year ago.
Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise
As of Oct 7, 2018, Red Robin had cash and cash equivalents of $20.4 million compared with $17.7 million as of Dec 31, 2017. The company’s long-term debt amounted to $220.9 million as of Oct 7, 2018, compared with $266.4 million at the end of 2017.
2018 Guidance Lowered
Red Robin lowered its guidance for 2018. The company anticipates earnings of $1.60-$1.80 per share, down from the prior estimate of $1.80-$2.20. The Zacks Consensus Estimate for 2018 is currently pegged at $1.91.
Zacks Rank & Stocks to Consider
Red Robin has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the same space are The Habit Restaurants, Inc. (HABT - Free Report) , carrying a Zacks Rank #1 (Strong Buy) along with BJ's Restaurants, Inc. (BJRI - Free Report) and Darden Restaurants, Inc. (DRI - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Habit Restaurants reported better-than-expected earnings in two of the trailing four quarters, the average beat being 66.7%.
BJ's Restaurants has an impressive long-term earnings growth rate of 64.5%.
Darden Restaurants delivered better-than-expected earnings in the last four quarters, the average beat being 5.1%.
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