Red Robin Set To Launch Outlet In Florida, Expand Footprint

Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) plans to open a new Red Robin Gourmet Burgers and Brew restaurant at Jacksonville, FL, on Jul 24.

Apart from the signature items like Royal Red Robin Burger, Bottomless Steak Fries, Smoke & Pepper Burger, and the Red's Tavern Double, the menu will also feature Freckled Lemonade. Additionally, the restaurant will serve Black & Bleu burger, The Marco Pollo, the Southern Charm Burger, along with a variety of salads, entrees, soups and wraps.

Currently, there are more than 550 Red Robin restaurants across the U.S. and Canada. However, the company loses out in terms of international presence.

We note that 2016 was a tough year for Red Robin given the impact of acquiring lower-margin franchise restaurants and higher labor cost that hurt margins. Furthermore, the challenging sales environment in the restaurants space that continued to affect business throughout first-half 2017 too, has led Red Robin to lower its pace of unit expansion. Although it plans to open roughly 17 new Red Robin locations this year, it is also looking forward to close down nine existing ones.

Nevertheless, shares of the company have gained 12.6% year to date, outperforming the Zacks categorized Retail-Restaurants industry’s addition of 10.1%.

This performance can be attributed to rising investor confidence as the company undertakes various initiatives to improve sales and regain market share as the year progresses. In this regard, Red Robin’s efforts to reinvigorate the brands through menu innovation, operational improvement, remodeling programs and continued focus on off-premise, online ordering business are encouraging.

Additionally, upward estimate revisions raise optimism in the stock’s prospects. Notably, the Zacks Consensus Estimate for 2017 and 2018 earnings, moved north by 4.4% and 7%, respectively, in the last 60 days.

Zacks Rank and Key Picks

Currently, Red Robin sports a Zacks Rank #1 (Strong Buy). Some other top-ranked restaurant stocks include Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) , Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC) and McDonald’s Corporation (NYSE:MCD) . While McDonald’s holds a Zacks Rank #2 (Buy), the other two companies carry the same rank as Red Robin. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, Dave & Buster’s, Diversified Restaurant Holdings and McDonald’s pulled off an average positive earnings surprise of 30.50%, 45.83% and 7.01%, respectively.

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