Stock Story -
What Happened: Shares of american restaurant chain BJ’s Restaurants (NASDAQ:BJRI) fell 12.9% in the morning session after the company reported second-quarter earnings results. Overall sales were underwhelming as growth was flat, and revenue only narrowly beat analysts' expectations. The company noted that sales momentum didn't pick up fast in April. However, the momentum picked up in the latter part of the quarter, with the company adding, "Approximately half of our restaurants set sales records during the quarter, particularly around Mother's Day, Father's Day and graduations."
However, there were other challenges, mostly related to profitability, as operating margin fell below expectations. The company called out rising food costs ( +2% quarter-over-quarter) driven by inflation on key items such as chicken wings and avocados.
Moving on, sales outlook wasn't too optimistic, as the company expects Q3 2024 comp sales in the 1% to 2% range. It doesn't help that Q3 has been BJRI's lowest sales quarter due to seasonality. Overall, it was a mixed yet challenging quarter for the company.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy BJ's? Find out by reading the original article on StockStory, it's free.
What is the market telling us: BJ's's shares are somewhat volatile and over the last year have had 13 moves greater than 5%. But moves this big are very rare even for BJ's and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 15.4% on the news that the company reported first-quarter results that beat analysts' same-store sales, gross margin, and EPS expectations. The results could have been better as same-store sales fell 1.7% due to heavier-than-usual winter weather in January. This affected restaurant traffic, which fell approximately 9% in January before recovering to negative mid-single digits in February and March. As these headwinds are mostly concentrated in the first quarter, management expects second-quarter comp sales to be only slightly negative due to less pricing partly offset by improving traffic trends. The second quarter is expected to benefit from key events, including Mother's Day, Father's Day, and graduation celebrations. Zooming out, we think this was a great quarter that shareholders will appreciate.
BJ's is down 6.7% since the beginning of the year, and at $32.93 per share it is trading 13.6% below its 52-week high of $38.13 from March 2024. Investors who bought $1,000 worth of BJ's's shares 5 years ago would now be looking at an investment worth $828.43.
