Red Robin Matches Wall Street Expectations with 10 Percent Decline in Q1 Earnings

Andrew Klips  |

Shares of Red Robin Gourmet Burgers, Inc. (RRGB) are trading higher on Tuesday following the release of first-quarter financials that showed increasing sales, but a 10 percent drop in earnings as higher costs weighed on profits.

For the quarter, the Greenwood Village, Colorado-based company said that total revenue, which includes sales at corporate stores and franchise royalties, rose 2.3 percent to $306.35 million, compared to $299.46 million in last year’s quarter. Net income dropped to $9.48 million, or 66 cents per share, from $10.56 million, or 71 cents per share, in the first quarter of 2012.

The results were nearly spot on Wall Street predictions of profits of 66 cents per share on revenue of $306.3 million.

Same-store-sales at the corporate-owned restaurants increased by 2.2 percent compared to last year’s quarter. It was the eleventh consecutive quarter of increases in company-owned same-store-sales.

General and administrative costs rose by $3.5 million to $29.0 million as Red Robin spent more on value-enhancing initiatives and incentive-based compensation. Selling expenses increased by $300,000 to $8.6 million, compared to last year’s quarter. Overall, costs and expenses were up by 3.2 percent to $292.8 million.

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Guests at the chain of casual dining restaurants spent more each visit with guest check’s increasing by 2.8 percent versus the year prior quarter. Guest count, however, decreased by 0.6 percent.

Profit margin improved 30 basis points to 21.5 percent, compared to 21.2 percent in Q1 2012.

“Seasonality shifts from changes in our reporting period and media timing had a negative impact on our guest traffic and earnings in the first quarter this year,” said Steve Carley, chief executive at Red Robin.

The quarter ended with 337 company-owned Red Robin restaurants (including 3 new stores opened during the quarter), 5 company-owned Red Robin Burger Works locations and 133 franchised Red Robin stores.

Looking forward, the company guided same-store-sales growth of 2.5 percent to 3.0 percent this fiscal year, which consists of 52 weeks versus 53 weeks last year. Operating margin is anticipated around 20.9 percent. Red Robin said the sensitivity of its earnings per diluted share to a 1 percent change in guest counts for fiscal 2013 is estimated to be $0.23 on an annualized basis. Additionally, a 10 basis point change in restaurant-level operating margin is expected to impact earnings per diluted share by approximately $0.05, and a change of $187,000 in pre-tax income or expense is equivalent to approximately $0.01 per diluted share. 20 new store openings are planned for the year.

Shares of RRGB were up almost 40 percent in 2013 through Monday’s close at $49.01. Shares gapped down initially on Tuesday morning to $46.11 with the earnings report, but have rallied since to be trading ahead by 3 percent near $50.50 to trade at their highest level since September 2006.

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