BJs Restaurants, Inc. (BJRI - Free Report) is poised to benefit from digital Initiatives and menu innovation. However, increased expenses along with coronavirus-related woes remain concerns.
Let us delve deeper into factors that suggest that investors should hold on to the stock for the time being.
Sales Building Efforts
BJ’s Restaurants implemented several sales-building initiatives, which have contributed positively to the company’s performance over the last few quarters.
The company is also investing in technology-driven initiatives like digital ordering to boost sales. The company’s app and digital platforms are allowing it to offer promotions more effectively and efficiently. It has also rolled out several digital initiatives like digital check-ins, digital menus and digital payment options to attract more customers.
Also, productivity improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line, going ahead. Notably, the company continues to drive awareness in its key markets through greater and more targeted marketing. During the coronavirus pandemic, digital ordering is likely to be a major growth driver.
The restaurant developed a robust pipeline of new menu items, focusing on its EnLIGHTened menu category, featuring its new super food options. Moving ahead, the company plans to introduce new flavors and improve the quality of its menu items. Notably, its extensive focus on refining and streamlining the menu has been a major growth driver.
BJ’s Restaurants has been facing declining traffic due to the coronavirus induced coronavirus-induced shutdowns. As of May 11, 2020, dining rooms were allowed to re-open with limited seating for social distancing and other safety precautions. This included restaurants in Alabama, Arizona, Arkansas, Florida, Indiana, Kansas, Nevada, Oklahoma, South Carolina, Tennessee and Texas. Additionally, restaurants in other states are expected to open with limited capacity in the near term.
Although the company has reopened the aforementioned restaurants, it is likely to witness dismal traffic due to the social distancing protocols. Owing to the uncertainty of the crisis, the company has also suspended its dividend payout and share buyback programs.
Moreover, the company has been continuously shouldering increased expenses, which have been detrimental to margins. In first-quarter 2020, labor costs — as a percentage of sales — increased 460 basis points (bps) to 40.8%. Occupancy and operating costs (as a percentage of sales) were 24.1%, up 290 bps year over year.
Notably, the company’s shares have declined 48.8% so far this year against the industry’s 8.4% decline.
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(Strong Buy) Rank stocks here.
Some better-ranked stocks in the Retail-Wholesale sector are Sprouts Farmers Market, Inc. (SFM - Free Report) , Domino's Pizza, Inc. (DPZ - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) . Sprouts Farmers sports a Zacks Rank #1, while Domino's and Yum China carry a Zacks Rank #2 (Buy).
Sprouts Farmers has a three-five year earnings per share growth rate of 4.4%.
Domino's has a trailing four-quarter positive earnings surprise of 12.7%, on average. The company’s earnings beat the Zacks Consensus Estimate in the last four quarters.
Earnings in 2021 for Yum China are expected to surge 79.2%.
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