Bear Of The Day: BJs Restaurants

Founded in 1978 and headquartered in Orange County, CA, BJ’s Restaurants (BJRI -Free Report) owns and operates a chain of 186 high-end casual dining restaurants in 24 states. Their signature menu items include deep dish pizza, craft beer and “pizookie” dessert. They call their positioning “contemporary, high-quality, casual plus”.

Results Disappoint

The company reported lackluster Q3 results, missing both on the top and bottom lines. Adjusted earnings of $0.30 per share fell short of the Zacks Consensus Estimate of $0.32 by 6.3%.

Revenues increased 1.9% year over year to $233.7 million but were below the Zacks Consensus Estimate of $239 million by 2.2%.

Did the Presidential Election Impact Results?

According to the management, “businesses dependent on consumer discretionary spending were challenged by a variety of macro factors including the timing of the Summer Olympics as well as the current economic uncertainty arising from the political elections.”

The CEO Greg Trojan said the election had created "a nearly unprecedented level of negativity and doubt in the minds of everyday American citizens."  

Falling Estimates

Analysts have slashed their estimates for the company after disappointing results.Zacks Consensus Estimates for the current and the next fiscal year have fallen to $1.75 per share and $1.95 per share respectively, from $1.82 and $2.10, 30 days ago. Declining estimates sent the stock to a Zacks Rank #5 (Strong Sell).

The Bottom-Line

While the company has taken a number of positive steps in recent years, including introduction of a new menu in February 2014, simplifying kitchen processes under project Q and cost control initiatives, a challenging sales environment continues to pose headwinds.

Further the Zacks Industry Rank of 192 out of 265 (bottom 28%) also indicates chances of underperformance in the short-term.

According to the latest MillerPulse survey, same-store sales fell 0.6% in October in the worst performance for the restaurant industry in more than three years. Traffic at the restaurants continued to decline as investors remained reluctant to spend.

But there are a handful of companies in the industry that have reported strong results despite industry headwinds. Investors should take a look at Domino’s Pizza (DPZ), which currently enjoys a Zacks Rank #1 (Strong Buy).

Disclosure: None

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