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BJ's Restaurants (BJRI) Up 60% in 3 Months: More Room to Run?
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BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from menu innovation, off-premise services and digital initiatives. Also, increased focus on productivity improvement efforts bodes well. In the past three months, shares of the company have surged 59.7% compared with the Zacks Retail - Restaurants industry’s 2% growth. However, rise in operating expenses along with coronavirus-related woes is a concern.
Let us discuss the factors that highlight why investors should hold on to the stock for the time being.
Factors Driving Growth
BJ’s Restaurants’ extensive focus on refining and streamlining its menu is the key driver for improved traffic. During the fourth quarter, the company began testing of its virtual brand — slow roast — across its 13 restaurants. The delivery-only concept features slow roast items and other protein-centric products. Despite impressive sales and solid customer feedback, the company continues to monitor the test to ensure kitchen efficiency maintenance.
Even though the company reopened majority of its dining rooms with limited capacity, its off-premise operations continue to be a driving factor for overall sales. During fourth-quarter 2020, the company upgraded restaurants with kitchen system technology to improve order visibility and pacing. Also, the company upgraded its front-end order and pickup technology to boost convenience and order accuracy. Backed by these initiatives, off-premise sales during the quarter came in at approximately $28,000 per week.
Apart from this, the company continues to drive awareness in its key markets through greater and more targeted marketing. To support online ordering, the company is transitioning from the current PDF form factor to a dynamic HTML version, thereby boosting promotions as well as guest-driven navigation. Other productivity improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line, going ahead.
Meanwhile, the company implemented several sales-building initiatives to boost sales from its dine-in services. The company began testing its beer subscription service in a group of Northern California restaurants. Notably, high customer engagement is being witnessed on the back of new beer releases along with program benefits. Items that are currently in the pipeline include, Bourbon Barrel Chocolate Stout and Coffee Blonde. Going forward, the company plans to expand this program at majority of its California restaurants and other states as well.
Concerns
BJ’s Restaurants’ fourth-quarter operations were negatively impacted by the coronavirus pandemic. Notably, with increased state and local restrictions, dining rooms in California have been shut again. With services pertaining to takeout and delivery-only, comps during November and December fell, 27% and 45.3%, respectively.
Moreover, the company is continuously shouldering increased expenses, which have been detrimental to margins. Pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on margins. The company is also facing high general and administrative expenses.
During the fiscal fourth quarter, labor costs, as a percentage of sales, came in at 38.4%, up 200 basis points (bps) year over year. Occupancy and operating costs (as a percentage of sales) were 29.1% compared with 22.5% in the year-ago quarter. General and administrative expenses (as a percentage of sales) increased 150 bps to 6.8% in the quarter. Restaurant-level operating margin came in at 6.6% compared with 16% in the year-ago quarter.
Some better-ranked stocks in the Zacks Retail-Wholesale sector include L Brands, Inc. (LB - Free Report) , Genesco Inc. (GCO - Free Report) and Jack in the Box Inc. (JACK - Free Report) . L Brands and Genesco sport a Zacks Rank #1, while Jack in the Box carries a Zacks Rank #2 (Buy).
L Brands has a three-five year earnings per share growth rate of 13%.
Genesco has a trailing four-quarter earnings surprise of 71.8 %, on average.
Earnings in 2021 for Jack in the Box are expected to rise 37.2%.
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BJ's Restaurants (BJRI) Up 60% in 3 Months: More Room to Run?
BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from menu innovation, off-premise services and digital initiatives. Also, increased focus on productivity improvement efforts bodes well. In the past three months, shares of the company have surged 59.7% compared with the Zacks Retail - Restaurants industry’s 2% growth. However, rise in operating expenses along with coronavirus-related woes is a concern.
Let us discuss the factors that highlight why investors should hold on to the stock for the time being.
Factors Driving Growth
BJ’s Restaurants’ extensive focus on refining and streamlining its menu is the key driver for improved traffic. During the fourth quarter, the company began testing of its virtual brand — slow roast — across its 13 restaurants. The delivery-only concept features slow roast items and other protein-centric products. Despite impressive sales and solid customer feedback, the company continues to monitor the test to ensure kitchen efficiency maintenance.
Even though the company reopened majority of its dining rooms with limited capacity, its off-premise operations continue to be a driving factor for overall sales. During fourth-quarter 2020, the company upgraded restaurants with kitchen system technology to improve order visibility and pacing. Also, the company upgraded its front-end order and pickup technology to boost convenience and order accuracy. Backed by these initiatives, off-premise sales during the quarter came in at approximately $28,000 per week.
Apart from this, the company continues to drive awareness in its key markets through greater and more targeted marketing. To support online ordering, the company is transitioning from the current PDF form factor to a dynamic HTML version, thereby boosting promotions as well as guest-driven navigation. Other productivity improvement initiatives such as a centralized call center to capture more online orders are expected to boost the top line, going ahead.
Meanwhile, the company implemented several sales-building initiatives to boost sales from its dine-in services. The company began testing its beer subscription service in a group of Northern California restaurants. Notably, high customer engagement is being witnessed on the back of new beer releases along with program benefits. Items that are currently in the pipeline include, Bourbon Barrel Chocolate Stout and Coffee Blonde. Going forward, the company plans to expand this program at majority of its California restaurants and other states as well.
Concerns
BJ’s Restaurants’ fourth-quarter operations were negatively impacted by the coronavirus pandemic. Notably, with increased state and local restrictions, dining rooms in California have been shut again. With services pertaining to takeout and delivery-only, comps during November and December fell, 27% and 45.3%, respectively.
Moreover, the company is continuously shouldering increased expenses, which have been detrimental to margins. Pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on margins. The company is also facing high general and administrative expenses.
During the fiscal fourth quarter, labor costs, as a percentage of sales, came in at 38.4%, up 200 basis points (bps) year over year. Occupancy and operating costs (as a percentage of sales) were 29.1% compared with 22.5% in the year-ago quarter. General and administrative expenses (as a percentage of sales) increased 150 bps to 6.8% in the quarter. Restaurant-level operating margin came in at 6.6% compared with 16% in the year-ago quarter.
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 Zacks Retail-Wholesale sector include L Brands, Inc. (LB - Free Report) , Genesco Inc. (GCO - Free Report) and Jack in the Box Inc. (JACK - Free Report) . L Brands and Genesco sport a Zacks Rank #1, while Jack in the Box carries a Zacks Rank #2 (Buy).
L Brands has a three-five year earnings per share growth rate of 13%.
Genesco has a trailing four-quarter earnings surprise of 71.8 %, on average.
Earnings in 2021 for Jack in the Box are expected to rise 37.2%.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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