Shares of Greenwood Village-based Red Robin Gourmet Burgers Inc. plummeted to a 16-month low Tuesday after the restaurant chain warned that fourth-quarter results would fall short of expectations.
Analysts at Morgan Keegan, Piper Jaffray and Thomas Weisel Partners responded by downgrading the company’s stock. Shares of Red Robin dropped more than 26 percent to close at $38.29 on the Nasdaq.
In a conference call with analysts Tuesday morning, Red Robin officials said they expect fourth-quarter 2005 earnings of 29 to 32 cents per share and year-end earnings of $1.60 to $1.63 per share. That was down from an earlier forecast of 40 to 41 cents per share for the quarter and $1.71 to $1.73 for the year.
The company attributed the shortfall to lower-than-expected same-store sales and said sales at newly opened sites also came in below projections. The company opened a record 11 restaurants in the first quarter, including nine in new markets, and franchised nine locations in the first quarter, it said.
Some analysts criticized the company for not explaining the shortfalls more thoroughly.
“Management was relatively sparse in its details leading to its (fourth-quarter) earnings shortfall,” Morgan Keegan analyst Destin Tompkins said in a research note. Tompkins downgraded the company from “outperform” to “market perform.”
Red Robin has struggled to rebuild its credibility since August, when chief executive Michael Snyder and former chief financial officer James McCloskey resigned after an investigation into Snyder’s travel and entertainment expenses. The company named Dennis B. Mullen its new chief executive.
“Today’s news delays that credibility-rebuilding process,” Piper Jaffray analyst Peter Oakes said in research notes issued Tuesday. Oakes downgraded Red Robin to “market perform” and noted: “In our opinion, management failed to fully explain the miss.”
Red Robin plans to raise menu prices an average of 1 percent in the first quarter and intends to open 28 to 33 new restaurants this year.
Staff writer Kristi Arellano can be reached at 303-820-1902 or karellano@denverpost.com.
