Red Robin posts best traffic in three years
Red Robin reported its strongest traffic result in three years in the first quarter, a sign that its turnaround efforts are continuing to take hold.
“Overall, the underlying traffic trends in the business are improving, and our momentum is increasingly being driven by compelling platforms rather than relying on traditional discounting,”
Same-store sales were down 0.6% year over year, and traffic was down 1.6%, for the period ended April 19. That was an improvement over the previous quarter, when traffic fell 3.6%.
Executives credited the chain’s Big Yummm value meals and targeted marketing for driving traffic as well as a new menu that balances value with pricier items, such as the new Towering Sliders—four mini double cheeseburgers stacked vertically, with dipping sauces.
The sliders set a record for customer satisfaction scores and are helping to boost average check.
“Overall, the underlying traffic trends in the business are improving, and our momentum is increasingly being driven by compelling platforms rather than relying on traditional discounting,” said CEO David Pace, according to a transcript on financial services site AlphaSense.
The chain is also improving its bottom line. Restaurant-level operating margins increased 50 basis points to 14.8%, their highest mark in five years. This was in part due to better labor management, which saved about 130 basis points on labor costs.
“The ops team just did a heck of a job tightening their belts, managing this much more effectively than we had in the past,” Pace said.
Employee turnover is at historically low levels and employee satisfaction scores are tracking above industry benchmarks.
The positive results sparked a run on Red Robin stock Wednesday, with shares trading up more than 20% by late afternoon, to around $4.64.
The efforts are part of Red Robin’s First Choice turnaround strategy unveiled last June, which included plans to drive traffic, find money, fix restaurants and create a winning culture.
On the find money front, the company is in the final stages of discussions to refranchise some company-owned locations, which Pace said is another sign of the chain’s renewed health.
“The sustained level of interest we're seeing reflects growing confidence in our system improvements and the strength of the Red Robin brand,” he said.
It will also complete a first round of light restaurant retouches in June.
Total revenues for the quarter were $378 million, $14 million less than last year due to restaurant closures and lower same-store sales. Red Robin reported a net loss of $2.2 million compared to net income of $1.2 million a year ago.
