Shares of Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) gained a whopping 31.5% yesterday after the news surfaced that Vintage Capital Management LLC offered to acquire 100% of the company’s shares. Vintage Capital Management, which already owns 11.6% of Red Robin’s shares, is the third largest shareholder of the company.
In order to acquire 100% of Red Robin’s shares, Vintage Capital Management is ready to offer $40 per share, which represents a premium of 57% from the stock closing price as of Jun 13, 2019.
Recently, Red Robin approved a shareholder rights plan, also known as “poison pill”. Poison pill reduces chances of gaining control over a company by any person or group through the accumulation of shares in the open market without appropriately compensating shareholders.
In an effort to enhance shareholder value, the company is willing to discuss with its shareholders. It has been searching for CEO since the retirement of Denny Marie in April.
Meanwhile, Red Robin witnessed dismal top and bottom-line performance over the past few quarters. Following a decline of 10.2%, 3% and 0.3% in the fourth, third and second quarter of 2018, respectively, the company’s top line edged down 2.8% in first-quarter 2019. Meanwhile, earnings declined 72.5% in first-quarter 2019. In the fourth, third, second and first quarters of 2018, earnings declined 44.9%, 23.8%, 24.6% and 22.5%, respectively.
Red Robin has been witnessing rising costs and expenses in the recent quarters. The Affordable Care Act, commonly known as Obamacare, would continue to have an adverse impact on restaurant operators. Meanwhile, the company is investing heavily in several sales-building initiatives like advertising and technical upgrades, which will likely result in elevated costs. Remodeling and restaurant maintenance also add to the already rising expenses. In the first quarter of 2019, restaurant-level operating profit margin contracted 170 basis points (bps) to 18.3%, following a decline of 110 bps in the preceding quarter. The decline in the first quarter resulted from 60-bps rise in other restaurant operating expenses and 30-bps increase in occupancy costs.
In the past year, the company’s shares have declined 38% against the industry’s rally of 23.4%.
Zacks Rank & Stocks to Consider
Red Robin currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Brinker International, Inc. (NYSE:EAT) , Chipotle Mexican Grill, Inc. (NYSE:CMG) and The Habit Restaurants, Inc. (NASDAQ:HABT) . All of these stocks presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brinker International, Chipotle Mexican Grill and Habit Restaurants have impressive long-term earnings growth rates of 8.2%, 19.2% and 20%, respectively.
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Brinker International, Inc. (EAT): Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report
The Habit Restaurants, Inc. (HABT): Free Stock Analysis Report
Red Robin Gourmet Burgers, Inc. (RRGB): Free Stock Analysis Report
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