Red Robin Gourmet Burgers Inc. swung to a loss in the third quarter, but executives said the casual-dining chain’s renewed emphasis on value is helping to improve declining traffic trends.
Same-store sales at company-owned restaurants dropped 3.6 percent during the Oct. 2-ended quarter, driven by a 2.4-percent decline in customer counts and a 1.2-percent decrease in average check.
However, the traffic decline at the Greenwood, Colo.-based chain was an improvement over the 3.9-percent drop in customer counts during the second quarter.
Red Robin CEO Denny Marie Post said in a call Thursday with analysts that the company has made a conscious decision to focus on value to generate top-of-mind awareness.
“We made a decision to invest and reassert our everyday value offerings beginning in Q3, consciously trading off average check,” Post said.
The chain expanded its Tavern menu, with items priced at $6.99 and served with bottomless fries. Post said the move pushed Red Robin ahead of casual-dining competitors in performance.
“We won’t rest until traffic is positive, and even then we won’t rest,” she said.
Post sees potential in building Red Robin’s off-premise business.
Next week, Red Robin will expand an online ordering pilot to 36 locations, she said. Two tests are underway in 20 restaurants using third-party delivery partners. The chain plans to roll out carryout, delivery and catering in late 2017.
“Off-premise is our No. 1 priority, and we have committed dedicated resources throughout our organization to bring this opportunity to life effectively and efficiently,” Post said. “Today’s guest is defining convenience as the option to choose whether to enjoy food at the restaurant, carry it out, or have that same food delivered to consume at home or over a meeting table at the office. Today’s successful restaurant is both a preferred destination and a convenient source.”
In an effort to cut costs, Red Robin has eliminated 17 primarily senior positions, Post said. The company also plans to close its Canadian support office by the end of the first quarter next year.
Red Robin reported a net loss of $1.3 million, or a loss of 10 cents per share, during the third quarter, compared with net income of $8.3 million, or 58 cents per share, a year ago.
Excluding a 48-cent per-share charge for restaurant impairment and closure costs, adjusted earnings per share were 38 cents for the quarter.
Revenue increased 4.9 percent, to $297.3 million.
Red Robin also plans to significantly reduce new unit development, opening no more than 16 units in 2017, and even fewer in 2018, down from the 30 units each year originally planned.
The chain opened 10 new restaurants in the third quarter alone this year, for a total of 459 company-owned units, three Red Robin Burger Works locations and 86 franchised restaurants.
During the quarter, Red Robin said it will close nine existing fast-casual Burger Works units, and rebrand the remaining three locations as Red Robin Express.
For the fourth quarter, Red Robin expects revenue to grow between 4 percent and 6 percent, driven by increased operating weeks, but partially offset by the expected decline in same-store sales of between 1.5 percent and 3.5 percent, including expectations of traffic declines between 1 percent and 3 percent.