Red Robin Gourmet Burgers (RRGB, Financial) has been serving up mouth-watering gourmet burgers since it launched in 1969. In addition to gourmet burgers, the company’s offerings also include other variety of food items such as appetizers, salads and desserts. They also have a bar offering, which includes a variety of beers, beer shakes and cocktails. This 500-store-strong brand recently won the 2014 VIBE Vista Award for the Best Beer Program in a chain restaurant format. Red Robin has always brought innovation to the front when it comes to staying ahead of the game in the gourmet sector.
How did the company perform in 2014?
Red Robin Gourmet Burgers showed a strong growth in the 2014 third quarter compared to the year before. Revenues rose to $267.4 million, which was a rise of 16% compared to the corresponding quarter of the previous year. The diluted earnings per share rose to $0.5 from $0.32 the year before. The net income for the third quarter was at $7.2 million from $4.7 million. The fiscal net income was at $28.6 million with diluted per share earnings of $2.
At the end of the third quarter, the total number of Red Robin Gourmet Burger restaurants stood at 402 company owned and 92 franchises. This presented quite a leap from the number of company-owned restaurants in the previous year, which stood at 345. In July 2014, the company spent over $40 million in acquiring 32 franchised restaurants across the country.
An area for concern is, however, that the customer footfall count decreased in the third quarter. Analysts from Tigress Financial noted that the greatest concern was over customer traffic trends, considering that customer footfalls were down by nearly 2.3% in the third quarter of 2014. The bigger fear is that when competition heats up, the market share of Red Robin is likely to be further challenged and their guest footfalls could reduce creating a negative downturn in sales of food products for the company. The positive in the third quarter that led to increased revenues was that the average guest check increased by 3.2%.
For the remainder of the 2014 fiscal, the company projected that the newly acquired restaurants were expected to add revenue of $24 million in the fourth quarter, while the net restaurant revenue growth in the FY was expected to reach 3%. The company also plans to open 19 new restaurants and remodel 65 of its stores as a part of a brand transformation exercise.
Steve Curley, chief executive officer of Red Robin, claimed that the company was happy with the performance during the third quarter and will focus on delivering high-quality products while delivering elevated service and refreshed environments.
What's in store for 2015?
The improvement of the macroeconomic backdrop in the United States is likely to translate into a positive growth trajectory for the company in the year 2015. Despite increasing labor costs, healthcare costs and also the volatility of same-store sales, decreased food inflation and fuel costs is expected to contribute to an increase in revenue and a steady stock price escalation through 2015 for RRGB.
Analyst firm Tigress Financial has upgraded the shares of Red Robin currently trading around the $80 per share mark to neutral from underperform. Analysts Wunderlich and Jefferies have maintained their Buy rating on RRGB shares. Investors who have a keen eye for restaurants and eateries may find this stock a worthwhile investment for 2015.
