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Here's Why You Should Retain BJ's Restaurants (BJRI) Stock
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BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from the culinary strategy, expansion and remodeling initiatives. Also, the emphasis on the cost-saving program bodes well. However, dismal comps and inflationary pressures are headwinds.
Let us discuss the factors that highlight why investors should retain the stock for now.
Factors Driving Growth
BJRI focuses on its culinary strategy and guest satisfaction to drive growth. The company’s culinary strategy inclines toward familiarity and quality, resulting in improved operational metrics such as faster service times and higher social sentiment scores compared to the previous year. Initiatives like the gracious hospitality program, including new server scripting, have led to enhanced hospitality scores and laid the groundwork for a newly rolled-out service model. The model optimizes server-to-table ratios and introduces expediter roles to expedite food delivery and elevate operational excellence.
In alignment with its three-year culinary strategy, BJRI focuses on offering premium upgrades like surf and turf alongside a value-oriented menu featuring appetizers priced under $10 and other affordable items. This strategy aims to differentiate the company in the market by emphasizing quality and value without resorting to extensive discounting tactics.
The company continues to focus on its expansion endeavors, with a balanced approach to opening new establishments while prioritizing optimal shareholder returns. The company's expansion strategy remains balanced, exemplified by the successful opening of its first Wisconsin location in Brookfield, which exceeded expectations. In the future, BJRI plans to introduce a new prototype that reduces construction costs by about $1 million per unit. The prototype integrates insights gleaned from recent remodels to enhance operational efficiency and appeal to customers.
The company remains steadfast in upholding rigorous operational standards while delivering strong returns on investments in new restaurant ventures. BJRI anticipates further enhancing shareholder value through ongoing margin expansion initiatives, leveraging sales growth and continuous productivity and cost savings endeavors. Over the long term, the company intends to achieve top-line sales growth in the 8-10% range through a combination of new unit expansion and mid-single-digit growth in comparable restaurant sales.
Image Source: Zacks Investment Research
In the past year, the company’s shares have gained 11.8% against the industry’s 7.5% decline.
Concerns
BJ's Restaurants is cautiously optimistic about business trends. The company’s comparable restaurant sales in the early weeks of the second quarter have experienced a slight decline similar to the first quarter. This reflects the impact of carrying over a substantial pricing adjustment from last year. The company expects second-quarter comparable sales to show a slight negative trend, considering the challenges posed by reduced pricing on checks, balanced by improving traffic patterns.
The company is consistently bearing increased expenses, which have been affecting margins. Although management initiated efforts to mitigate inflation and fluctuations in key operational costs by gradually raising menu prices and implementing cost-saving measures, improved purchasing practices, productivity enhancements and leveraging economies of scale, uncertainty persists regarding sustainment.
For the fiscal second quarter, BJRI anticipates a slight increase in total operating and occupancy costs due to the supplementary marketing spend. Commodity inflation pressures cannot be ruled out and it is cautious of uncertain macroeconomic conditions.
Zacks Rank & Key Picks
BJ’s Restaurants currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
The Zacks Consensus Estimate for WING’s 2024 sales and EPS suggests a rise of 27.5% and 37.1%, respectively, from year-ago levels.
Brinker International, Inc. (EAT - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 213.4%, on average. EAT’s shares have risen 97.9% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 5.1% and 41.3% growth, respectively, from the year-earlier actuals.
El Pollo Loco Holdings, Inc. (LOCO - Free Report) currently carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 19.4%, on average. LOCO’s shares have risen 12.2% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 9.9% growth, respectively, from prior-year figures.
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Here's Why You Should Retain BJ's Restaurants (BJRI) Stock
BJ's Restaurants, Inc. (BJRI - Free Report) is likely to benefit from the culinary strategy, expansion and remodeling initiatives. Also, the emphasis on the cost-saving program bodes well. However, dismal comps and inflationary pressures are headwinds.
Let us discuss the factors that highlight why investors should retain the stock for now.
Factors Driving Growth
BJRI focuses on its culinary strategy and guest satisfaction to drive growth. The company’s culinary strategy inclines toward familiarity and quality, resulting in improved operational metrics such as faster service times and higher social sentiment scores compared to the previous year. Initiatives like the gracious hospitality program, including new server scripting, have led to enhanced hospitality scores and laid the groundwork for a newly rolled-out service model. The model optimizes server-to-table ratios and introduces expediter roles to expedite food delivery and elevate operational excellence.
In alignment with its three-year culinary strategy, BJRI focuses on offering premium upgrades like surf and turf alongside a value-oriented menu featuring appetizers priced under $10 and other affordable items. This strategy aims to differentiate the company in the market by emphasizing quality and value without resorting to extensive discounting tactics.
The company continues to focus on its expansion endeavors, with a balanced approach to opening new establishments while prioritizing optimal shareholder returns. The company's expansion strategy remains balanced, exemplified by the successful opening of its first Wisconsin location in Brookfield, which exceeded expectations. In the future, BJRI plans to introduce a new prototype that reduces construction costs by about $1 million per unit. The prototype integrates insights gleaned from recent remodels to enhance operational efficiency and appeal to customers.
The company remains steadfast in upholding rigorous operational standards while delivering strong returns on investments in new restaurant ventures. BJRI anticipates further enhancing shareholder value through ongoing margin expansion initiatives, leveraging sales growth and continuous productivity and cost savings endeavors. Over the long term, the company intends to achieve top-line sales growth in the 8-10% range through a combination of new unit expansion and mid-single-digit growth in comparable restaurant sales.
Image Source: Zacks Investment Research
In the past year, the company’s shares have gained 11.8% against the industry’s 7.5% decline.
Concerns
BJ's Restaurants is cautiously optimistic about business trends. The company’s comparable restaurant sales in the early weeks of the second quarter have experienced a slight decline similar to the first quarter. This reflects the impact of carrying over a substantial pricing adjustment from last year. The company expects second-quarter comparable sales to show a slight negative trend, considering the challenges posed by reduced pricing on checks, balanced by improving traffic patterns.
The company is consistently bearing increased expenses, which have been affecting margins. Although management initiated efforts to mitigate inflation and fluctuations in key operational costs by gradually raising menu prices and implementing cost-saving measures, improved purchasing practices, productivity enhancements and leveraging economies of scale, uncertainty persists regarding sustainment.
For the fiscal second quarter, BJRI anticipates a slight increase in total operating and occupancy costs due to the supplementary marketing spend. Commodity inflation pressures cannot be ruled out and it is cautious of uncertain macroeconomic conditions.
Zacks Rank & Key Picks
BJ’s Restaurants currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Wingstop Inc. (WING - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter negative earnings surprise of 21.4%, on average. The stock has surged 113.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WING’s 2024 sales and EPS suggests a rise of 27.5% and 37.1%, respectively, from year-ago levels.
Brinker International, Inc. (EAT - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 213.4%, on average. EAT’s shares have risen 97.9% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 5.1% and 41.3% growth, respectively, from the year-earlier actuals.
El Pollo Loco Holdings, Inc. (LOCO - Free Report) currently carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 19.4%, on average. LOCO’s shares have risen 12.2% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 9.9% growth, respectively, from prior-year figures.