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Red Robin to pause unit growth at end of 2018

Burger chain swings to 3Q profit, sees off-premise sales rise

Red Robin Gourmet Burgers Inc. will pause unit growth at the end of 2018 amid casual-dining “category volatility,” the company CEO said Monday.

Denny Marie Post, CEO of the Greenwood Village, Colo.-based casual-dining brand, said halting unit growth would give the company time to test new approaches.

For the third quarter ended Oct. 1, which included an income-tax benefit, Red Robin swung to a profit of $2.7 million, or 21 cents a share, compared to a loss of $1.3 million, or 10 cents a share, in the prior-year period. Analysts had forecast earnings of 28 cents a share.

Revenue in the quarter rose 2.3 percent to $304.2 million from $297.3 million in the same quarter last year, about $5 million less than Wall Street had expected.

Red Robin stock fell nearly 24 percent in the after-hours market, trading around $51 a share, down $15.85 from its close.

Same-store sales declined 0.1 percent in the quarter, driven by a 0.1 percent decrease in average guest check and flat guest counts.

“Although we grew our share while beginning to implement service model changes that address rising labor costs, category volatility underscores our cautious outlook for the remainder of 2017 and our intention to pause unit growth as of year-end 2018,” Post said in a statement. “This decision will give us needed time to test new approaches to inform future growth.”

Red Robin has been working to increase its off-premise business. For the third quarter, the company said off-premise food and beverage sales increased to 7.6 percent, compared to 5.4 percent of sales in the prior-year period.

“Despite topline results that fell short of our expectations, Red Robin significantly outperformed the casual-dining industry on traffic for a fifth consecutive quarter,” Post said. “Our focus on compelling everyday value and the progress we have made in growing our off-premise business continued to pull us away from the category and we are now competing favorably with best-in-class casual dining chains.”

During the third quarter, the Red Robin opened seven company-owned restaurants and plans to open two more before the end of 2017.

As of Oct. 1, Red Robin had 565 restaurants. Of those, 479 were company-owned and the remaining 86 were franchised.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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