Red Robin Gourmet Burgers Inc. (RRGB) is vulnerable to economic headwinds, and we believe that the stock will continue to underperform the restaurant industry. Impeding the growth is its sagging same-store sales and declining traffic counts.
The company’s second-quarter 2009 same-store sales fell 11.5%. The chain expects guest counts to remain negative, and expects restaurant-level operating margins to decline by 50 to 80 basis points in fiscal year 2009.
In addition, more than 50% of total restaurants are located in areas, which have been hit hard by the housing downturn and economic slowdown. This may dampen the company’s growth potential.Zacks Investment Research
