Advisor, RED ROBIN GOURMET BURGERS
Red Robin (RRGB) CEO on 4Q Earnings
Red Robin (RRGB) CEO G.J. Hart joins Oliver Renick to discuss the company's 4Q earnings. Red Robin fell 13% on Thursday ...We're barely hanging on a multiyear lows right now, joining us the CEO GJ Heart and president at Red Robin Gourmet burgers GJ ...
About Gerard Hart
G.J. Hart, president, CEO, and director of Red Robin Gourmet Burgers, has discussed the company's "North Star" turnaround plan, which he described as a five-point strategy focused on returning to the brand's roots of quality, hospitality, and community engagement. In earnings calls and interviews, Hart stated that the company made progress in 2023, including a 1.6% increase in comparable restaurant sales and a 33% rise in EBITDA. He outlined plans to invest an incremental $3 million in marketing to promote the chain's expanded "bottomless" menu, which now includes 30 items beyond fries, and to redirect the loyalty program toward rewarding existing customers rather than offering discounts to new guests. Hart has also commented on broader industry trends, describing a partnership between Shake Shack and Delta Airlines to serve burgers in first class as a "challenging risk" due to the difficulty of maintaining burger quality after cooking. In leadership discussions, he has emphasized the importance of being genuine, caring for team members, and serving the people one leads, stating that culture in an organization is "done by design, not by default." Hart, a James Madison University graduate and benefactor of its Hart School, has also spoken about the need for restaurants to adapt to rising costs and labor challenges through innovation.
Transcript (21 segments)
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Host0:04
Let's talk dining out family burger time. Red Robin's been changing up the menu, including a lot of bottomless offerings. Unfortunately, bulls in the stock might be worried. The chart is bottomless. We're barely hanging on at multiyear lows right now. Joining us, the CEO GJ Hart and president at Red Robin Gourmet Burgers. GJ, thanks for coming back to the Schwab Network.
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GJ Hart0:24
Oh, thanks for having me, Oliver. Good to see you. Appreciate that.
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Host0:27
Let's talk about the numbers here. The market's been punishing you guys this year. You're holding on to multiyear lows. You made a lot of changes at the restaurant, you've been telling us about. It seems like some of this is showing up in improvement, particularly on the bottom line where the losses narrowed substantially, but it looks like analysts were looking for even more improvements. So what happened here?
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GJ Hart0:51
Look, in 2023, we laid out a plan to transform this business, and I have to say that we made incredible progress during the year. We posted a 1.6% comparable restaurant sales growth. We hosted a 33% increase in EBITDA. I'm really, really pleased where we are. These transformations take some time, and our teams have come together and we're doing a lot of amazing work. In 2023, we really dealt with the people component so we could provide better hospitality. We did that at the beginning of the year. We changed our cooking platforms in the middle of the year, and we launched 85% of our menu has been upgraded, and we launched that in October. A lot of things happened during 2023, and we're excited about 2024. These things have been flowing at the end of the day. It's the person the pud over time.
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Host1:49
One thing I was wanting you to clarify for us, because you look at the numbers. The top line revenue is positive. There's growth, single digits. But then the comps are negative. So what's that difference between the comp store sales versus the top line?
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GJ Hart2:04
Well, when I said comp store sales, it's just a year over year each restaurant in terms of their sales growth. And in 2023, we were up 1.6%.
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Host2:18
For the past year, you've been operating at a loss, but it's narrowed significantly. A year ago, adjusted loss per share was about 35 cents. You guys did 66 cents. She was hoping for something like 46 cents. Are there costs that surprised you in the past quarter?
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GJ Hart2:39
Well, look, there's always things that tend to surprise you, but there was nothing significant in that quarter that we were looking for. At the end of the day, it was a little bit softer than what we anticipated from a sales perspective, and of course, all of that flows through to the P&L. It's one of those things that you project out as best you can, and I think a lot of folks felt that in the fourth quarter. Things seemed to be a lot better in October, and then it seemed to slow down a bit in November, December.
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Host3:15
When you look forward, how do you insert yourself into the public food discussion? The restaurant businesses that we've been seeing making big moves in the stock market are generally in that fast casual category. The new Kava Mediterranean just being new high. Chipotle, of course, has been up there. There are restaurants stocks that are doing very well. Is there anything you can take from those models into your own as a sit down restaurant style?
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GJ Hart3:46
Yeah, casual dining. From our perspective, what we believe is the right thing for us to do is focus on everyday value. I think the consumer ultimately wants that value play. So one of the things you'll be seeing us come out with our marketing here in the next couple of weeks is focused on we have 30 bottomless items that you can get on our menu. Everything from people know us from a fry perspective, but they don't necessarily know you can get a side salad unlimited, you can get broccoli unlimited, you can get root beer floats unlimited. So we're going to be coming out and sharing that message, and hopefully we'll have some creative that can cut through a lot of the clutter out there. But I do think at the end of the day, focused on great value and a great experience. It's full service versus fast casual, so we provide the right kind of hospitality that's memorable at a good value, and I think at the end of the day we'll grow our business nicely.
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Host4:45
Do all the stores that you've got right now make sense? Because when I look at the average check being up and the comp sales down, the total revenue is being up. Is there any way to improve margins even more by shutting down the underperform stores?
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GJ Hart5:03
At this point, we've done a lot of that. At the end of 2022, we closed some of the restaurants that were not performing. In a portfolio with 500 plus restaurants, you're going to always have a few down at the bottom that you need to trim out. We'll be looking at that throughout the year, but there's no wholesale closures that need to happen here. We're very confident. We've seen all of our quartiles grow last year, and again in a transformation year like this to have that happen, we were very excited about particularly the bottom quartile, which were the best performers throughout the year.
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Host5:40
Tell me about the bottomless approach. I don't think I've ever seen a restaurant offer so many items bottomless before. I would imagine that's going to be a draw for customers from a cost perspective. Does it bring any risk to you for inventory? If you pile up on stuff and then people don't show up, you know, throw it out.
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GJ Hart6:00
Look, we've got very sophisticated ways of being able to project what our sales will be. No, not at all. In fact, I'll tell you, Oliver, this 30 bottomless items is something we've expanded a bit, but bottomless has been a key asset that this organization, an iconic brand that's been around 54 years, has had. It's kind of interesting that it really wasn't focused on besides fries over the last few years, and we think that coming out and really focusing on all the other items is going to be a draw. To your point, I'm excited about it because it's one of those things that screams value, and again, as I said earlier, that's what the consumers are looking for. We'll see how all that shakes out, but we're pretty positive.
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Host6:45
You forecast for the year revenues between 1.25 and $1.28 billion and CapEx upwards of about 35 million. Where's the CapEx coming from? Does that include marketing and ad?
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GJ Hart7:02
No, CapEx is just the actual dollars, and those are things that are in a normal course of business. There's technology investments, there's keeping our restaurants up and making sure that we maintain them. From a marketing perspective, we talk about in our guidance that we'll be investing some more money in marketing because we think it's the time to do that after we've done the fundamental work in 2023.
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Host7:25
Can you give me an idea of how much? Because it seems like that's going to be a big mission here with a lot of competition in the fast casual and dining world when you've got this new style of the bottomless. It sounds like people need to know about that, right?
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GJ Hart7:37
They do. And what we've said to folks is we're looking to invest an incremental $3 million. Most of that is in the first part of the year. If that goes well and we get the kind of returns that we think we might be able to, which we haven't forecasted in at this point, then we'll continue to invest. But at this point, it's an incremental $3 million spent.
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Host7:58
All right, with all that, operating profit margins improving from the year before, and the forecast seems like an important part of establishing that new bottomless efficiency. GJ, thanks for the update. Appreciate your time.
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GJ Hart8:11
You bet. Thanks for having me. Take care.
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Host8:16
Absolutely, Gerald GJ Hart.