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Red Robin CEO resignation muddies turnaround path, analysts say

Negative same-store sales trends continue at the brand

The resignation of Denny Marie Post as CEO at Red Robin Gourmet Burgers Inc. complicates any turnaround at the casual-dining chain, industry analysts said Thursday.

The Greenwood Village, Colo.-based company announced Post’s resignation Wednesday and said Pattye Moore, the board chair, would serve as interim CEO.

“The sudden departure of CEO Denny Marie Post, along with last fall’s departure of [chief operating officer] Carin Stutz, reduces visibility further on a potential turnaround story,” wrote Stephen Anderson, equity analyst with Maxim Group, in a note. “Until the CEO search comes up with a leader with a proven track record of turnaround experience, we refrain from recommending shares of RRGB at this time.”

Red Robin had paused unit growth at the end of 2018, sought to expand its foothold in off-premise sales and announced a refranchising effort, but same-store sales continued to slip.

Moore said Wednesday that for the first quarter ended March 24, the same-store sales had declined 3.6%. She blamed that in part on weather impact.

Despite refocusing its value propositions to improve sales and foot traffic, Red Robin’s same-store sales had declined 4.5% for the fourth quarter ended Dec. 30, and guest counts had fallen 4.4%.

Full-year same-store sales were down 2.6% in 2018, up 0.6% in 2017 and down 3.3% in 2016, according to Nation’s Restaurant News’ Same-Store Sales Report.

Anderson of the Maxim Group maintained a hold rating on Red Robin’s stock and lowered the price target to $25 from $29. At noon EDT Thursday, the company’s stock was trading at about $27 a share, down about 4.5% from Wednesday’s close of $28.22 a share.

Anderson added “we now believe RRGB’s turnaround story likely will be postponed until at least late 2019, refranchising also unlikely until 2020 at the earliest and measurable new unit growth unlikely until 2021.”

Alexander Slagle, an equity analyst with Jefferies, said in a note that Red Robin’s turnaround has been challenging.

“The topline environment has been particularly difficult for RRGB, given competitive pressures from larger peers, and a couple of self-induced stumbles,” Slagle said.

He added that dine-in business will need to be a priority for the brand.

“Despite success with off-premise (about 10% of sales), RRGB’s core dine-in business has been steadily deteriorating,” Slagle said, noting that dine-in sales were down 4.2% in 2018.

Meanwhile, Red Robin in Securities and Exchange Commission documents said Moore and the board agreed she would receive a base salary of $167,000 per month, prorated for partial months, during her tenure as interim president and CEO. The agreement stipulates that Moore will not receive any compensation as a director during her tenure.

As part of Post’s retirement severance package, the company said she would receive two year’s salary. Post’s base salary compensation was $774,040 a year in 2018, according to recent federal filings. She succeeded Stephen Carley as CEO in August 2016, when his base salary was reported as $794,235 for the year.

Post had worked with Red Robin since 2011, including positions as chief marketing officer, chief concept officer and president.

For the fourth quarter, which included asset impairment and other charges, Red Robin swung to a loss of $10.6 million, or 82 cents a share, from a profit of $8.8 million, or 68 cents a share, in the prior-year period. Revenues in the quarter, which included one less week than the same period last year, fell 10.8%, to $306.8 million from $343.9 million.

Red Robin has 570 restaurants in the United States and Canada.

Alan Liddle, NRN’s senior data and events editor, contributed to this report.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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