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BJ's Restaurants (BJRI) Rides on Comps Growth, Expansion Moves

BJ's Restaurants, Inc. BJRI banks on menu innovation, comps growth, expansion efforts and off-premise sales to drive growth. Although the company’s shares have declined 36.8% in the past year compared with the industry’s fall of 16.6%, the aforementioned factors are likely to act as growth drivers. Let’s delve deeper and find out why investors should hold onto the stock.

Factors Likely to Drive Growth

BJ’s Restaurants’ extensive focus on refining and streamlining its menu is the key to improved traffic. It has significantly boosted the average check with high incident rates. Additionally, the restaurant has also developed a robust pipeline of new menu items, focusing on its EnLIGHTened menu category, featuring its new superfood options. The company plans to introduce new flavors and improve the quality of its menu items. The company continues to focus on menu adjustments and pricing structure, as it intends to establish a broader rollout plan in the upcoming periods.

The company is also benefiting from robust comps growth. During the second quarter of fiscal 2022, comparable restaurant sales increased 11.7% year over year compared with a rise of 121.9% reported in the prior-year quarter. It also increased 4.8% from 2019 levels. The increase was primarily driven by stronger seasonal sales, improved staffing levels and a limited COVID impact. The company stated that the positive momentum continued into the fiscal third quarter, with period-to-date comps growth (through Jul 21) reported at 4% from 2019 levels.

BJ’s Restaurants is also focusing on expansion efforts to drive growth. As of Jun 28, 2022, BJ’s Restaurants owned and operated 214 casual dining restaurants (in 29 states). During the fiscal second quarter, the company opened a new restaurant in San Antonio, TX. It also opened a new restaurant in Framingham, MA. The company reported solid opening performances. The company plans to open five new restaurants in the second half of 2022. It remains steadfast in its commitment to expand its presence to at least 425 restaurants domestically. Given the level of new restaurant expansions combined with driving positive comparable restaurant sales, the company expects high-single-digit revenue growth in the coming years.

This Zacks Rank #3 (Hold) company is also gaining from robust digitalization. During the first quarter of fiscal 2022, the company emphasized refreshing its e-commerce platform with a modern user experience and advanced functionality. The new platform focuses on a personalized and one-to-one approach to digital marketing. It also offers personalized content and dynamic recommendations for enhancing guest interaction. Given the applied learnings coupled with fine-tuning of the program, the company anticipates the initiative to drive growth in the upcoming periods.

Zacks Investment Research
Zacks Investment Research


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Hurdles to Cross

BJ’s Restaurants' increased expenses have been affecting margins of late. Higher food inflationary costs, marketing expenses and costs related to sales-boosting initiatives are weighing on the company’s margins. In the fiscal second quarter, the company’s cost of sales, as a percentage of revenues, came in at 27.6% compared with the 26% reported in the prior-year quarter. The increase was primarily driven by the rise in food costs (up 10% year over year), partially mitigated by menu price increases. The company has also been facing high labor and benefit expenses. During the fiscal second quarter, labor and benefit expenses were $123.1 million compared with $104.2 million reported in the prior-year quarter. During the quarter, restaurant-level operating margin came in at 11.9% compared with the 14.8% reported in the year-ago quarter.

Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. TGLS, Cracker Barrel Old Country Store, Inc. CBRL and Arcos Dorados Holdings Inc. ARCO.

Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 3.5% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.

Cracker Barrel carries a Zacks Rank #2 (Buy). Cracker Barrel has a long-term earnings growth of 6.9%. Shares of the company have decreased 25.1% in the past year.

The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2. Arcos Dorados has a long-term earnings growth of 34.4%. Shares of the company have risen 32.6% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.


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