Red Robin Stock Bombs on CEO Departure, Sales Warning

RRGB's interim CEO said "challenging weather" impacted first-quarter revenue

Deputy Editor
Apr 4, 2019 at 10:40 AM
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The shares of restaurant chain Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) are slipping today, after CEO Denny Marie Post announced her retirement. The announcement comes at a tumultuous time for the burger company, with interim CEO Pattye Moore reporting weak first-quarter comparable-store sales, citing "challenging weather" in the U.S. As a result, RRGB shares are down 8.7% at $25.77 in early trading, set for their lowest close since 2011. 

It's been a tough year for RRGB, which suffered two major bear gaps in 2018, and bottomed out at a six-year low of $25.46 on Dec 26. Today, the equity is dangerously close to those lows, dipping below former support at the $27 level, and falling south of its year-to-date breakeven. 

Analysts are already chiming in, with BofA-Merrill Lynch downgrading Red Robin stock to "neutral" from "buy." Jefferies, meanwhile, cut its price target to $29 from $34, and Loop Capital trimmed its target to $31 from $35 and cut its earnings estimates for 2019 and 2020. Prior to today, there were nine "holds" already on the table, and only two "strong buy" ratings. However, the consensus 12-month target price of $32.11 represents a 20.5% premium to current levels, leaving the door open for additional price-target cuts. 

Meanwhile, recent option buyers are likely kicking rocks today. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), RRGB sports a 10-day call/put volume ratio of 2.67 that sits in the 82nd percentile of its annual range, suggesting a healthier-than-usual appetite for bullish bets of late. Should these optimistic positions start to unwind, the equity could face additional headwinds. 

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