Shares of WING have declined 0.8% in the past year. WING has a long-term earnings growth rate of 11%. Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Red Robin currently carries a Zacks Rank #3 (Hold). The company intends to monitor the situation regularly to gauge the impacts of COVID-19. Also, traffic is still low compared with pre-pandemic levels. For 2022, the company anticipates pricing in the mid-single digit, cost inflation in the mid-double digits and restaurant labor cost inflation in the mid-to-high single digit.Īlthough the company reopened most of its restaurants, the possibility of additional outbreaks can lead to lower capacity, social distancing and suspension of in-restaurant dining operations. During the quarter, the company reported higher-than-expected other operating costs owing to higher repair and maintenance expenses, record utility rates and higher-than-expected usage, restaurant supplies and higher fees associated with higher credit card usage. Other operating costs increased 2.7% year over year to $52.9 million. During the third quarter of 2022, the cost of sales rose 12.7% year over year to $70.6 million, while as a percentage of restaurant revenues, the metric increased 180 basis points to 25%. The company’s performance has been affected by higher commodity and labor inflation and costs related to sales-boosting initiatives. Shares of Red Robin have plunged 60.5% in the past year compared with the industry’s 7.7% fall. It anticipates annual sales of pizza to be more than $60 million and profitability to be above $25 million by 2024. Red Robin is optimistic about the success of this partnership. The company anticipates rolling out Donatos to approximately 150 restaurants in 2023. As of Oct 2, 2022, the company had completed its rollout of Donatos at approximately 50 restaurants for 2022. It stated that restaurants serving Donatos pizza outperformed non-Donatos locations by 10.1% in comparable restaurant revenues compared with 2019. During the third quarter of fiscal 2022, the company reported incremental sales concerning Donatos.
Red Robin still considers Donatos as a key growth driver. It is initiating an expanded floor plan space to support its off-premises and catering orders without impacting the dine-in business. The company intends to maintain the momentum by focusing on modifications related to its processes, staffing, floor plans and technology. As a percentage of total off-premise sales, the company reported solid contributions from third-party delivery (53.5%), to-go (34.9%), catering (7.5%) and Red Robin Delivery (4.1%). During third-quarter fiscal 2022, the company delivered the 10th consecutive quarter of off-premises sales dollars at more than double pre-pandemic levels. Red Robin continues to benefit from its robust off-premise sales. Also, it emphasized on testing other value programs around specific day parts (such as Happy Hour) and lunch specials to drive growth. The company intends to focus on creative recipes to drive higher checks and margins. During the fiscal third quarter, the company reported solid performance with respect to its LTO’s comprising of a $10 gourmet meal. This was complemented by the everyday value, including affordable prices, generous portions, signature bottomless sides and drinks. Also, it has been witnessing positive customer feedback related to its limited time offer (“LTO”) menu items. Red Robin’s efforts to improve sales and regain market share via efficient menu innovation, focus on increasing service speed and effective marketing strategy bode well.
Let’s discuss the factors highlighting why investors should retain the stock for the time being. However, inflationary pressures are a concern. Also, the emphasis on testing value programs around specific day parts bodes well. RRGB is likely to benefit from its menu innovation, off-premise business model and Donatos expansion.
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