Red Robin Continues Turnaround Efforts Following Strong 4Q

The Greenwood Village, Colo.-based casual-dining chain said fourth-quarter profits were up 32 percent

After reporting a strong finish to 2011 in the fourth quarter, Red Robin Gourmet Burgers officials said Thursday that turnaround efforts will continue this year with a new prototype, an expanded burger menu and the opening of four more fast-casual variants.

The Greenwood Village, Colo.-based casual-dining chain said fourth-quarter profits were up 32 percent following the transitional efforts in 2011 to revive the brand, which have included menu upgrades, initiatives to boost bar business and cost-cutting measures.

Though guest counts were still negative in the fourth quarter, the chain saw continued sequential improvements. Same-store sales for the quarter climbed 4.8 percent, driven by a 5.6-percent increase in average check that was partially offset by a 0.8-percent decline in traffic.

For the quarter ended Dec. 25, Red Robin’s net income was $2.9 million, or 20 cents per share, compared with $2.2 million, or 14 cents per share, a year ago.

Revenue increased by 7 percent to $206 million in the quarter, compared with $192.6 million a year ago.

For the year, same-store sales were up 2.9 percent on revenue that increased 5.9 percent to $914.9 million. Net income was $20.6 million, or $1.34 per share, compared with $7.3 million, or 46 cents per share, a year ago

In a call with analysts following the company’s earnings report, Steve Carley, Red Robin’s chief executive, attributed the strong performance to successful limited-time offers, like the Oktoberfest and Jim Beam burgers introduced during the quarter.

Guests are also ordering more appetizers, alcoholic beverages and desserts as a result of menu upgrades and last year’s bar revamp, he said.

During the fourth quarter, Red Robin opened the first of its new limited-service variations on the brand, which it dubbed Burger Works.

Designed for nontraditional locations and to compete with the growing number of fast-casual better-burger brands such as Smashburger and Five Guys Burgers & Fries, the 4,000-square-foot Burger Works so far has been meeting expectations, Carley said.

“The only negative feedback we’ve gotten so far is that we’re not serving our bottomless steak fries there,” he said.

The company plans to open four more Burger Works this year, including one on the campus of Ohio State University in late March and a second in Denver.

Carley said the company would also begin testing new prototype design elements to update the chain’s full-service restaurants to “make the brand more relevant.”

Menu expansion is also planned this year as the company adds to the range of burgers offered, said Denny Marie Post, Red Robin’s chief marketing officer and senior vice president.

At lunch, in particular, she said, guests have indicated they’d like more smaller, less expensive burgers to choose from, as well as more premium offerings.

The chain also will look at building sales with daypart-specific offerings at such times as lunch or happy hour.

Carley said Red Robin is two-thirds of the way toward meeting its goal of trimming up to $18 million in costs by the end of 2012, which is ahead of schedule.

Efforts so far have not impacted customer satisfaction scores, he said, and the cost-saving measures have helped mitigate commodity inflation, which was up 4 percent for the quarter, largely because of higher ground beef costs.

Red Robin ended the year with 327 company owned locations and 137 franchised restaurants.

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