GREENWOOD VILLAGE Colo. Thinning customer traffic contributed to a second-quarter drop in profit for Red Robin Gourmet Burgers Inc., and the casual-dining company expects little improvement for the remainder of the year, despite a return to national advertising, the company said Thursday.
Last year, Red Robin ran 23 weeks of brand building and awareness commercials on cable TV. But the spots did not draw crowds and the company suspended its national advertising for the first half of this year. The commercials returned in June and focused on product news, such as Red Robin’s re-introduction of its Steak Sliders. However the spots came too late in the second quarter to make an impact, the company said.
“For the three weeks we were on, we did see a bump on sales, but it wasn’t significant,” said Susan Lintonsmith, chief marketing officer.
Second-quarter same-store sales fell 11.5 percent at corporate restaurants, the company reported.
Red Robin rolled out a newly designed menu but kept prices the same, Lintonsmith said, adding that the company is testing some lower-priced appetizers and desserts in the Nashville market. Red Robin is also testing a customer loyalty program, Red Royalty, in some markets, offering special deals to repeat customers.
“Red Robin’s financial performance during the second quarter reflected the continued weak macroeconomic climate that is impacting the casual-dining industry as a whole, combined with our successful brand-building national advertising last year,” said Dennis Mullen, chairman and chief executive of Red Robin, which ended the second quarter with 304 corporate locations and 131 franchised units. The quarter closed July 12.
Net income fell 19 percent to $6.4 million, or 41 cents per share, versus $7.9 million, or 49 cents per share, in the same quarter last year. Latest-quarter revenue fell 2.6 percent to $201.1 million.
Red Robin expects to open two new corporate stores in the fourth quarter of this year, bringing the total of new stores for the year to 15. Franchisees will have opened four new stores this year with the completion of the fourth location in the third quarter.
Mullen said Red Robin will continue to avoid major discounting and stay focused on controlling costs and improving customer relations for the rest of the year.
“We’re not going down the discounting route,” Mullen told investors on the compamy’s quarterly conference call. “That damages the brand over the long term. We’ve done some testing, and will continue to do some testing but we’ve made no decision if we will go down that route and if we did it, it would not be a long term strategy.”
Contact Dina Berta at [email protected].