Red Robin stock price rises as 4Q profit doubles

The stock price for Red Robin Gourmet Burgers Inc. rose significantly on Tuesday after the company reported a more than doubling of fourth-quarter profit over the prior year.

During a call to analysts following the fourth-quarter and full-year financial reports, the company also reiterated traffic-driving plans for 2013 — including the previously announced test of new premium burgers — while warning of continued volatility in consumer discretionary spending.

For the quarter ended Dec. 30, Red Robin reported net income of $6.5 million, or 45 cents per share, compared with $2.9 million, or 20 cents per share, a year ago. Excluding charges related to the company’s debt refinancing in December 2012, the company said net income was $8.4 million for the quarter.

Revenue for company-operated restaurants climbed 16 percent for the quarter to $240.7 million, compared with $206 million a year ago. Systemwide, revenue increased 15 percent to total $327.5 million, compared with $285.1 million a year ago.

Same-store sales for the quarter grew 1.4 percent for company-owned restaurants, including a 0.3-percent increase in traffic and a 1.1-percent increase in average check that reflected guests buying more drinks and appetizers, as well as a “modest” menu price increase during the quarter that offset higher commodity costs for beef and potatoes, the company said.

The news sent stock prices up nearly 20 percent on Tuesday to $43.33 late in the day as analysts predicted the burger chain would continue to steal market share.

Stephen Anderson, senior restaurant analyst for Miller Tabak + Co. LLC, wrote in a report Tuesday that Red Robin’s “third consecutive quarterly traffic increase gives us more confidence in the company’s ability to compete against larger rivals.”

Steve Carley, Red Robin’s chief executive, described 2012 as a “foundational” year, during which the Greenwood Village, Colo.-based casual-dining chain outpaced the industry in guest-count growth and margin expansion.

“Looking ahead to 2013, our goal is to build on what we have already accomplished to continue elevating the guest experience and extending our burger authority, while we capitalize on our significant growth potential for new unit development,” Carley said.

Combating economic headwinds

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As reported earlier this year at analyst events, Carley said Red Robin would make efforts to improve the restaurant experience for customers and better manage margins by improving efficiency.  

Carley said the chain is testing various levels of “brand transformation” within 21 restaurants to evaluate upgrades that range from a $125,000 “bar only” enhancement to a more comprehensive $400,000 remodel. He also noted that the brand would open 20 company-owned restaurants.

Meanwhile, a more immediate menu improvement includes a shift to a spiral menu format by midyear that Carley said would allow for “more regional menu items and more regional pricing,” making the brand “more nimble and responsive to a changing marketplace.”

Red Robin is testing new premium burgers that could be added to the menu in a “barbell” balance to the more value-positioned Tavern Double burgers launched last year. Also coming are new appetizers and desserts that the company hopes will build the average check.

For the year, Red Robin’s net income was $28.3 million, or $1.93 per share, compared with $20.6 million, or $1.34 per share, including an extra week in 2012 that contributed an estimated $3.1 million, or 21 cents per share.

Revenue for the year totaled $977 million, compared with $914.9 million in fiscal 2011. Same-store sales for the year increased 1.1 percent, including a 1.7-percent increase in average guest check partially offset by a 0.6-percent decline in traffic.

Looking ahead at 2013, the company expects same-store sales growth of 2.5 percent to 3 percent, based on expected increases in average check and guest visits, along with a 2-percent menu price increase designed to offset expected commodity inflation of 4 percent.

Traffic overall, however, is expected to be flat to down 0.5 percent, said Stuart Brown, the chain’s chief financial officer, and the company is expecting to continue to see consumers cautious about spending.

“Economic headwinds will continue to impact casual dining, and we perceive the sector as experiencing another year of flat to negative traffic,” he said.

Red Robin ended the year with 339 company-owned restaurants, including five of the smaller Burger Works locations, as well as 133 franchised units.

Contact Lisa Jennings at [email protected].
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