American restaurant chain BJ’s Restaurants (NASDAQ:BJRI) missed analysts' expectations in Q3 FY2023, with revenue up 2.34% year on year to $318.6 million. Turning to EPS, BJ's made a GAAP loss of $0.16 per share, down from its loss of $0.07 per share in the same quarter last year.
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BJ's (BJRI) Q3 FY2023 Highlights:
- Revenue: $318.6 million vs analyst estimates of $325.9 million (2.22% miss)
- EPS: -$0.16 vs analyst estimates of -$0.02 (-$0.14 miss)
- Gross Margin (GAAP): 11.9%, up from 10.3% in the same quarter last year
- Same-Store Sales were up 0.4% year on year
- Store Locations: 217 at quarter end, increasing by 3 over the last 12 months
Founded in 1978 in California, BJ’s Restaurants (NASDAQ:BJRI) is a chain of restaurants whose menu features classic American dishes, often with a twist.
Sit-Down DiningSit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.
Sales GrowthBJ's is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 4.14% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre, but to its credit, it opened new restaurants and grew sales at existing, established dining locations.
This quarter, BJ's revenue grew 2.34% year on year to $318.6 million, falling short of Wall Street's estimates. Looking ahead, the analysts covering the company expect sales to grow 3.53% over the next 12 months.
Number of StoresWhen a chain like BJ's is opening new restaurants, it usually means it's investing for growth because there's healthy demand for its meals and there are markets where the concept has few or no locations. Since last year, BJ's restaurant count increased by 3, or 1.4%, to 217 locations in the most recently reported quarter.
Taking a step back, BJ's has generally opened new restaurants over the last eight quarters, averaging 1.24% annual increases in new locations. This growth is decent compared to other restaurant businesses but should be taken lightly as the industry is quite mature. Analyzing a restaurant's location growth is important because expansion means BJ's has more opportunities to feed customers and generate sales.
Same-Store SalesA company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.
BJ's demand has been spectacular for a restaurant business over the last eight quarters. On average, the company has grown its same-store sales by an impressive 13.8% year on year. This performance suggests its steady rollout of new restaurants could be beneficial for shareholders. When a company has strong demand, more locations should help it reach more customers seeking its meals.
In the latest quarter, BJ's year on year same-store sales growth was flat, or 0.4%. By the company's standards, this growth was a meaningful deceleration from the 8.9% year-on-year increase it posted 12 months ago. One quarter fluctuations aren't material for the long-term prospects of a business, but we'll watch BJ's closely to see if it can reaccelerate growth.
Key Takeaways from BJ's Q3 Results With a market capitalization of $562.7 million and more than $12 million in cash on hand, BJ's can continue prioritizing growth.
We struggled to find many strong positives in these results. Its revenue, gross margin, and EPS all missed Wall Street's estimates. On the bright side, the company continues progressing with its cross-functional cost savings initiative to improve operating margins. So far, it has achieved $30 million of annualized savings to date. Overall, this was a mixed quarter for BJ's. The company is down 4.11% on the results and currently trades at $22.62 per share.
The author has no position in any of the stocks mentioned in this report.
