Red Robin Gourmet Burgers (RRGB) is poised to return to its historical status as a high-return-on-capital, high-profit-growth company and gain market share as new management implements new marketing strategies, says Bryan C. Elliott, Senior Equity Analyst with Raymond James & Associates, Inc.
“If [management is] successful in doing that through some of the brand repositioning and merchandising and marketing changes that we expect to see over the next few months — broadening the menu, new creative on TV — if they are successful at those things, it can begin to see strong comp sales and higher store cash flow margins,” Elliott said.
The new strategy’s success could then create a high-enough return on the cost of building a new unit that will justify accelerating expansion, which Red Robin has been successful at in the past, says Elliott.
“Red Robin is a very differentiated brand that, when well managed, has historically gone out and captured a lot of market share in new markets. And unit growth stories — companies that are able to open new units and sustain strong results on a per-store basis — are increasingly rare in the U.S. and thus are selling at high valuations,” Elliott said.
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