Yahoo Finance Is Red Robin (RRGB) Doomed to Have a Terrible 2023 Too?
Red Robin Gourmet Burgers, Inc. RRGB has plunged 66.1% year to date, compared with the industry’s decline of 10.2%. The dismal performance can be primarily attributed to inflationary pressures.
A decline in margin continues to affect the company. During the quarter, the cost of sales rose 12.7% year over year to $70.6 million, while as a percentage of restaurant revenues, the metric increased 180 basis points to 25%. Other operating costs increased 2.7% year over year to $52.9 million.
Red Robin has been strategically increasing prices to mitigate the impact of inflation while maintaining a strong value proposition at the same time.
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Can the Stock Stage a Comeback in 2023?
This Zacks Rank #3 (Hold) company’s sales and earnings in fiscal 2023 are expected to witness growth of 3.6% and 54.3% year over year, respectively.
Red Robin has been investing more in technology and data infrastructure. The company is set to grow its off-premise, online-ordering business via carry-out, delivery and catering. The growing demand for off-premise orders is resulting in higher traffic.
A key long-term growth driver for the company is its guest loyalty program — Red Robin Royalty — initiated in 2011 with a goal to increase guest count. During third-quarter fiscal 2022, the royalty membership count came in at 11 million, reflecting an increase of 800,000 members from 2021 end.
Red Robin still considers Donatos as a key growth driver. As of Oct 2, the company had completed its rollout of Donatos at approximately 50 restaurants for 2022. On the third-quarter conference call, the company said that restaurants serving Donatos pizza outperformed non-Donatos locations by 10.1% in comparable restaurant revenues compared with 2019.
The company anticipates rolling out Donatos to approximately 150 restaurants in 2023. Red Robin is optimistic about the success of this partnership. It anticipates annual sales of pizza to be more than $60 million and profitability to be above $25 million by 2024.
Increase in off-premise sales is likely to benefit the company. Although more guests have started visiting restaurants, the company’s off-premise sales remain strong. During third-quarter fiscal 2022, the company delivered the 10th consecutive quarter of off-premises sales dollars at more than double pre-pandemic levels. As a percentage of total off-premise sales, the company reported solid contributions from third-party delivery (53.5%), to-go (34.9%), catering (7.5%) and Red Robin Delivery (4.1%).
The aforementioned factors might drive the company’s share price in 2023 if the global economic condition remain favorable.
Key Picks
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. TGLS, Wingstop Inc. WING and Chuy's Holdings, Inc. CHUY.
Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). Shares of the company have gained 14.5% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 11.2% and 9%, respectively, from the year-ago period’s levels.
Wingstop carries a Zacks Rank #2 (Buy), at present. WING has a long-term earnings growth rate of 12%. Shares of WING have decreased 15.6% in the past year.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.3% and 16.1%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2. CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have declined 0.1% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 8.6% and 10.4%, respectively, from the corresponding year-ago period’s levels.
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Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
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Wingstop Inc. (WING) : Free Stock Analysis Report
