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Here is a look at guidance and key focus points ahead of earnings on Thursday.

Following RRGB’s last earnings call on May 20th, I wrote a post titled, “RRGB – A LESSON ON HOW NOT TO RUN A RESTAURANT”.  As the title suggests, I was less-than-impressed by the extraordinary dependence on LTOs and advertising for transaction counts that RRGB had developed.   Below I have re-posted a chart that illustrates this point.  Whether the new menus they introduced in May have driven comps successfully or not remains to be seen.  To me it seems that they have trained the customer to only return with a coupon in hand.

RRGB: GLANCE AT THE 2Q10 MENU - rrgb sss1

SAME STORE SALES

  • To maintain or sequentially improve two-year average blended same-store sales, Red Robin will need to post +1.1% or better for 2Q10.
  • Per StreetAccount, the Street is expecting a company same-store sales number of 0%, which would imply a 55 bp sequential deceleration in quarterly top line trends. 

GUIDANCE

  •  Comparable restaurant sales of flat to +1%
  • Expecting revenue of $872 million to $880 million and EPS of $1.10 to $1.30.  1% change in comparable restaurant sales is approximately $0.21 in earnings per diluted share.  
  • Expecting deflation in our commodities for a large portion of basket: between -0.5% and -1% for 2010
  • Expecting some offset due to G&A savings.  Expecting 16.5 to $17 million per quarter for the remainder of the year
  • RRGB expects the average cash investment for new company restaurant development in 2010 to be ~$1.9 million per restaurant (less than the ~$2.5 million per restaurant of three years ago)
  • Four new company-owned restaurants are currently under construction.  12 to 13 openings expected during 2010 – remaining 8 to 9 scheduled for 2H10
  • Franchisees are expected to open between 3 and 4 restaurants this year
  • Continuing to expand our third party gift cards placement during the first quarter growing to about 8,000 retail locations, up from 7,400 at the end of 2009
  • Goal is to achieve 10,000 third party retailer locations for gift cards by the end of 2010.
  • 2010 effective tax rate is expected to be ~17%
  • 2010 CapEx is expected to be ~35 million to $40 million, which will be funded entirely out of operating cash flow
  • Debt payments of $18.7 million required by the term loan portion of the existing credit facility will be made from free cash flow after CapEx in 2010
  • Remaining free cash flow will be used to make payments on revolving credit facility

Howard Penney

Managing Director