We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
BJ's Restaurants Banks on Digitization Efforts, Costs High
Read MoreHide Full Article
BJ's Restaurants, Inc. (BJRI - Free Report) continues to focus on digitization and off-premise services to revive the top line. Moreover, the company stated that it possesses enough liquidity to survive the coronavirus pandemic for some time. In the past three months, shares of the company have surged 42.7% compared with the industry’s 13.7% growth. However, rise in labor and other operating expenses along with coronavirus-related woes is concerning.
Let us delve deeper into factors highlighting why investors should hold on to the stock for the time being.
Factors Driving Growth
BJ’s Restaurants has implemented several sales-building initiatives, which have contributed to the company’s performance over the past few weeks. Notably, its increased focus on off-premise services along with dining re-openings bodes well. As of Jun 30, 2020, the company had reopened dining rooms in 208 of its temporarily-closed restaurants while one of its restaurants remained temporarily closed due to the pandemic.
Apart from Dining re-openings, the company is investing in technology-driven initiatives like digital ordering to boost sales. Also, productivity-improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line. The company continues to drive awareness in its key markets through greater and more targeted marketing.
Nonetheless, the company’s app and digital platforms are allowing it to offer promotions more effectively and efficiently. To this extent, it has rolled out several digital initiatives like digitized check-ins, menus and payment options to attract customers.
Moreover to boost sales from its dine-in services, the company has initiated the opening and expansion of patios around the perimeter of its restaurants. Notably, the addition of 155 patios enables the company to increase its seating capacity and serve more guests, while maintaining social-distancing protocols.
Meanwhile, the company plans to introduce new flavors and improve the quality of its menu items. Notably, it plans on bringing back Prime Rib for both dining-in and take-out by mid-August 2020. The company is also working on Family Bundles comprising Slow-Roasted Tri-Tip in order to boost single-serve catering options.
In terms of financial stability, the company stated that it has sufficient liquidity to maintain operations at the current scenario for some time.
Concerns
The coronavirus outbreak has rattled the Retail - Restaurants industry, and BJ’s Restaurants has also not been spared. Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to the social-distancing protocols. Moreover, due to a rise in COVID-18 cases, dining rooms in California have been closed again. As a result, the company is currently operating with 70% indoor dining rooms compared with 95% as of June-end.
Moreover, the company has been continuously shouldering increased expenses, which have been detrimental to margins. Higher marketing expenses and costs related to sales-boosting initiatives are weighing on the company’s margins. The company is also facing high general and administrative expenses.
In second-quarter 2020, labor costs — as a percentage of sales — increased 420 basis points (bps) to 40.2%. Occupancy and operating costs (as a percentage of sales) were 35.8%, up 1440 bps year over year.
Some better-ranked stocks in the same space include Papa John's International, Inc. (PZZA - Free Report) , El Pollo Loco Holdings, Inc. (LOCO - Free Report) and Jack in the Box Inc. (JACK - Free Report) . Papa John's sports Zacks Rank #1, while El Pollo Loco and Jack in the Box carry a Zacks Rank #2 (Buy).
Papa John's earnings in 2021 are expected to surge 65.2%.
El Pollo Loco has a trailing four-quarter earnings surprise of 94.1%, on average.
Jack in the Box has a three-five year earnings per share growth rate of 10.6%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.
This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
Image: Bigstock
BJ's Restaurants Banks on Digitization Efforts, Costs High
BJ's Restaurants, Inc. (BJRI - Free Report) continues to focus on digitization and off-premise services to revive the top line. Moreover, the company stated that it possesses enough liquidity to survive the coronavirus pandemic for some time. In the past three months, shares of the company have surged 42.7% compared with the industry’s 13.7% growth. However, rise in labor and other operating expenses along with coronavirus-related woes is concerning.
Let us delve deeper into factors highlighting why investors should hold on to the stock for the time being.
Factors Driving Growth
BJ’s Restaurants has implemented several sales-building initiatives, which have contributed to the company’s performance over the past few weeks. Notably, its increased focus on off-premise services along with dining re-openings bodes well. As of Jun 30, 2020, the company had reopened dining rooms in 208 of its temporarily-closed restaurants while one of its restaurants remained temporarily closed due to the pandemic.
Apart from Dining re-openings, the company is investing in technology-driven initiatives like digital ordering to boost sales. Also, productivity-improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line. The company continues to drive awareness in its key markets through greater and more targeted marketing.
Nonetheless, the company’s app and digital platforms are allowing it to offer promotions more effectively and efficiently. To this extent, it has rolled out several digital initiatives like digitized check-ins, menus and payment options to attract customers.
Moreover to boost sales from its dine-in services, the company has initiated the opening and expansion of patios around the perimeter of its restaurants. Notably, the addition of 155 patios enables the company to increase its seating capacity and serve more guests, while maintaining social-distancing protocols.
Meanwhile, the company plans to introduce new flavors and improve the quality of its menu items. Notably, it plans on bringing back Prime Rib for both dining-in and take-out by mid-August 2020. The company is also working on Family Bundles comprising Slow-Roasted Tri-Tip in order to boost single-serve catering options.
In terms of financial stability, the company stated that it has sufficient liquidity to maintain operations at the current scenario for some time.
Concerns
The coronavirus outbreak has rattled the Retail - Restaurants industry, and BJ’s Restaurants has also not been spared. Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to the social-distancing protocols. Moreover, due to a rise in COVID-18 cases, dining rooms in California have been closed again. As a result, the company is currently operating with 70% indoor dining rooms compared with 95% as of June-end.
Moreover, the company has been continuously shouldering increased expenses, which have been detrimental to margins. Higher marketing expenses and costs related to sales-boosting initiatives are weighing on the company’s margins. The company is also facing high general and administrative expenses.
In second-quarter 2020, labor costs — as a percentage of sales — increased 420 basis points (bps) to 40.2%. Occupancy and operating costs (as a percentage of sales) were 35.8%, up 1440 bps year over year.
Zacks Rank & Key Picks
BJ’s Restaurants currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space include Papa John's International, Inc. (PZZA - Free Report) , El Pollo Loco Holdings, Inc. (LOCO - Free Report) and Jack in the Box Inc. (JACK - Free Report) . Papa John's sports Zacks Rank #1, while El Pollo Loco and Jack in the Box carry a Zacks Rank #2 (Buy).
Papa John's earnings in 2021 are expected to surge 65.2%.
El Pollo Loco has a trailing four-quarter earnings surprise of 94.1%, on average.
Jack in the Box has a three-five year earnings per share growth rate of 10.6%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.
This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
See their latest picks free >>