BJ's Restaurants, Inc.'s BJRI robust sales-building initiatives, enhanced loyalty program and technology-driven initiatives, like digital ordering, to boost sales bode well. However, the coronavirus related woes still remain a major concern. Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to the social distancing protocols. Let's delve deeper.
BJ's Restaurants has implemented several sales-building initiatives, which have contributed to the company's performance over the past few weeks. Notably, its increased focus on off-premise services and dining re-openings augur well.
Even though the company has reopened majority of its dining rooms with limited capacity, its off-premise operations continue to be a driving factor for overall sales. To this end, the company added Slow-Roasted Ribs, Parmesan Chicken, Atlantic Salmon and Rib-Eye Steaks to its off-premise menu at attractive prices. It is also working on new SMS text and email technology to boost customer convenience in terms of pickup and delivery. As a result of these initiatives, the company's average weekly off-premise sales nearly tripled to lower $30,000 per week. Overall, off-premise sales have more than doubled compared to pre-COVID-19 levels, while dining rooms have recorded half of normal sales levels through June-end.
The company's app and digital platforms are allowing it to offer promotions more effectively and efficiently. To this extent, it has rolled out several digital initiatives like digitized check-ins, menus and payment options to attract customers.
BJ's Restaurants has enough liquidity to survive the coronavirus pandemic for some time. As of Jun 30, 2020, the company has approximately $86.7 million of cash on its balance sheet along with another $50 million under its line of credit. Although the company is experiencing cash burn of $0.5-$1 million per week, it stated that it has sufficient liquidity to maintain operations at the current scenario for some time.
Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to the social distancing protocols.
Moreover, with increased state and local restrictions, dining rooms in California have been closed again. As a result, the company is currently operating with 70% indoor dining rooms compared with 95% as of June-end.
BJ's Restaurants, which shares space with Dine Brands Global, Inc. DIN, Dunkin' Brands Group, Inc. DNKN and Dave & Buster's Entertainment, Inc. PLAY, has been bearing the brunt of increased expenses. This, in turn, has been affecting margins of late. Higher pre-opening costs, marketing expenses and costs related to sales-bolstering initiatives are weighing on margins. Particularly, slow roasting ovens and handheld tablets are adding to the restaurants' costs. The company is also facing high general and administrative expenses.
In second-quarter 2020, labor costs, as a percentage of sales, increased 420 basis points (bps) year over year to 40.2%.
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