Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Red Robin Gourmet Burgers Inc (RRGB, Financial) reported positive comparable restaurant sales in the first five weeks of the second quarter, despite a headwind from the removal of virtual brands.
- The company has seen significant improvements in guest satisfaction scores, with overall satisfaction now in line with the industry average.
- The revamped Red Robin Royalty program has shown promising early results, with new members visiting more frequently.
- The company has made substantial progress on its North Star Five Point Plan, including operational improvements and cost savings.
- Marketing initiatives, including the 'Leave Room for Fun' campaign, have shown positive early results, with increased brand perception and intent to visit.
Negative Points
- Total revenues for the first quarter decreased by $29.3 million compared to the same period last year, primarily due to a 6.5% decline in comparable restaurant revenue.
- Restaurant-level operating profit as a percentage of restaurant revenue decreased by 370 basis points, driven by strategic investments in labor and food quality.
- Inflationary pressures are expected to continue, with anticipated inflation across all cost categories in the range of 3% to 4% for 2024.
- The elimination of virtual brand offerings has resulted in a 200 to 250 basis point sales headwind.
- General and administrative costs and selling expenses have increased, reflecting investments in marketing and community partnership events.
Q & A Highlights
Q: Can you give more breakdown on the comps for the first couple of weeks in Q2, specifically traffic and price?
A: Todd Wilson, CFO: We've seen sequential improvement in same-store sales throughout 2024, including traffic. The positive same-store sales at the start of Q2 are due to improved traffic and a slight increase in price.
Q: What factors contributed to the increase in labor costs as a percentage of sales in the quarter?
A: G.J. Hart, CEO: The increase was due to strategic investments in labor to improve guest satisfaction and performance. Additionally, there were $1.8 million in extraordinary expenses related to Workmen's Comp claims and high health insurance claims.
Q: How is the consumer behavior changing, especially in managing check sizes?
A: G.J. Hart, CEO: We are seeing an uptick in value-oriented Tavern burgers, indicating some consumers are managing their checks. However, promotional activities around premium burgers and steady sales of add-ons and desserts suggest overall consumer health is stable.
Q: Can you provide more color on the sequential improvement in profitability expected in the second half of the year?
A: Todd Wilson, CFO: The improvement is driven by the stabilization of traffic trends and the elimination of headwinds from virtual brands. We expect modestly positive traffic in the second half, which will drive profitability.
Q: How is the new marketing platform performing, and what are the early feedback and results?
A: G.J. Hart, CEO: The new marketing strategy has shown a 200 basis point improvement in traffic in targeted markets. The campaign focuses on brand halo, value through bottomless items, and upgraded ingredients, all of which have received positive feedback.
Q: What are you doing to drive membership in the loyalty program and reactivate dormant accounts?
A: G.J. Hart, CEO: We have implemented welcome emails for new members, increased organizational focus on the program, and integrated it prominently on our website. These efforts have led to a 10% increase in membership year-to-date.
Q: What is the initial customer reaction to the new menu items introduced this year?
A: G.J. Hart, CEO: New items like the Mad Love burger, ribs, and various appetizers have been well-received. The upgraded ingredients in existing items have also garnered positive feedback.
Q: How is the Partner Program at the general manager level performing, and what behaviors are you seeing?
A: G.J. Hart, CEO: The program has significantly boosted morale and engagement. Managers are more involved in P&L management, leading to reduced turnover and increased attention to operational details. It's early, but the initial results are promising.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
