BJ’s Restaurants Faces Decline After Q3 Earnings Report

BJ’s Restaurants, Inc. (BJRI) released its fiscal Q3 2024 earnings, showcasing mixed results: earnings fell short of estimates while revenue surpassed expectations. Both metrics saw an increase year over year.

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Following the earnings report, BJRI shares dropped by 5% in after-hours trading on October 31. Investors reacted negatively as the company acknowledged underutilization of traffic growth, attributing this to unexpected rises in restaurant costs. This resulted in a decline in their restaurant-level operating margin compared to the same period last year.

Earnings and Revenue Highlights

In the reported quarter, BJRI posted an adjusted loss per share of 13 cents, falling short of the Zacks Consensus Estimate of a 3 cent profit. In the third quarter of the previous fiscal year, the company reported a 16 cent loss per share.

BJ’s Restaurants, Inc. Price, Consensus, and EPS Surprise

BJ’s Restaurants, Inc. price-consensus-eps-surprise-chart | BJ’s Restaurants, Inc. Quote

Total revenues reached $325.7 million, slightly exceeding the consensus estimate by 0.04%. This marks a year-over-year growth of 2.2%, benefiting from increased guest traffic and the popularity of the Pizookie Meal Deal.

Comparable restaurant sales grew by 1.7% year over year, up from a 0.4% increase in the same quarter last year. Analysts had forecasted a 1.9% increase.

Cost and Margin Analysis

Labor costs constituted 37.1% of sales, remaining flat compared to the previous year. This was slightly higher than the expected 36.7%.

Occupancy and operating costs, which represent 24.7% of sales, improved from 25.1% year over year, matching our estimates.

Meanwhile, general and administrative expenses rose to 6.4% of sales, an increase of 30 basis points from the prior year and above the predicted 6.2%.

The restaurant-level operating margin dipped to 11.7%, compared to 11.9% in the same quarter last year, falling short of the estimated 12.5%.

Financial Standing

As of October 1, 2024, BJRI had cash and cash equivalents of $18.4 million, down from $29.1 million at the end of fiscal 2023. Total debt decreased to $66.5 million, from $68 million at the end of the prior fiscal year.

BJRI’s Ranking and Competitor Insights

BJ’s Restaurants holds a Zacks Rank #3 (Hold).

Better-ranked stocks in the retail and wholesale sector include Chipotle Mexican Grill, Inc. (CMG), Shake Shack Inc. (SHAK), and Yum China Holdings, Inc. (YUMC), each with a Zacks Rank #2 (Buy). A complete list of today’s top Zacks stocks can be found here.

Chipotle has delivered an average earnings surprise of 9.8% over the last four quarters and has gained 37% in the past year. The Zacks Consensus Estimate forecasts CMG to achieve sales and earnings per share growth of 14.9% and 22.2%, respectively, for 2024 compared to the previous year.

Shake Shack recorded a trailing four-quarter earnings surprise of 18.3%, with its shares climbing 115.4% over the last year. The expectation for SHAK’s 2024 sales and earnings per share growth stands at 14.1% and a remarkable 100% respectively.

Yum China boasts a trailing four-quarter earnings surprise of 26.6% and has risen by 4% this year. The 2024 projections for YUMC indicate sales and earnings per share growth of 4.5% and 11.5%, respectively.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.