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BJ's Restaurants Down 26% YTD: Can the Stock Revive in 2020?

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Shares of BJ's Restaurants (BJRI - Free Report) have declined 26% year to date against the industry’s rally of 20.7%. The stock’s dismal performance was caused by lower-than-expected earnings, stiff competition and high costs.

Notably, earnings have been declining from previous-year levels, over the past few quarters reflecting analyst’s concern over the stock’s growth potential. To this end, in the first, the second and the third quarter of 2019, the bottom line declined 7.5%, 13.9% and 53.8% year over year, respectively.

Apart from these factors, high dependency on consumer discretionary spending, increasing costs and a slowdown in unit development plan are potential headwinds. BJ’s Restaurants is persistently making expenses, which have been affecting margins of late. Comparable restaurant sales in the third quarter dropped 0.3% from the prior-year quarter’s figure. The downside was caused by Hurricane Dorian that affected approximately 10% of its restaurants and weakness in certain markets of California.

BJ’s Restaurants is facing intense competition from other restaurateurs that are capitalizing on the emerging market potential.

Efforts to Revive Performance

BJ’s Restaurants’ various strategic sales-building initiatives that include menu innovation and enhanced loyalty program are likely to drive the top line in the upcoming quarters. With focus on productivity and efficiency along with a plan of balanced restaurant opening, the company is heading toward near and long-term success.

Moreover, the company anticipates to open its last two restaurants of fiscal 2019 in the fourth quarter. This will enable the company to achieve the goal of opening seven restaurants this fiscal. Going forward, it also expects to open eight-ten new restaurants in fiscal 2020.

BJ’s Restaurants’ extensive focus on refining and streamlining its menu is the key driver for improved traffic. The restaurant has o developed a robust pipeline of new menu items. It is focusing on its EnLIGHTened menu category, which features new super food options.

Moreover, the company is investing heavily in technology-driven initiatives, like digital ordering, to boost sales. The company’s app and digital platforms enable it to offer promotions more effectively and efficiently.

Bottom Line

We hope that such well-chalked efforts will help this Zacks Rank #3 (Hold) company regain its momentum in the near term. Additionally, the stock’s VGM Score of B and long-term earnings growth rate of 13.7% reflect its inherent strength.

Stocks to Watch

Chuy's Holdings, Inc (CHUY - Free Report) has a long-term earnings growth rate of 17.5%. It presently sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Chipotle Mexican Grill, Inc (CMG - Free Report) and Bloomin' Brands, Inc (BLMN - Free Report) each carry a Zacks Rank #2 (Buy). The companies have long-term earnings growth rate of 19.7% and 9.8% respectively.

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