Red Robin steps up its investments to drive traffic and fix restaurants

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Red Robin reported a decline in total revenues, same-store sales, and traffic in the second quarter reported Wednesday after market, but its stock rose by double digits, nonetheless. Analysts are optimistic about the traffic-driving initiatives put into place when Dave Pace was named chief executive officer in April, as well as the company’s profit increase and investment targets.

In the second quarter, total revenues were $283.7 million versus $300.2 million in the second quarter of fiscal 2024. Same-store sales declined 3.2%, including a 5.5% decline in guest traffic.

That said, Red Robin’s sharpened focus on operational efficiencies, including labor improvements, drove a 280-basis-point improvement in restaurant-level profit margin during the second quarter.

“Our operators have become much more disciplined in managing through a labor matrix,” Pace said. “That involves being confident and more accurate in their forecasting and then scheduling against their forecasting, which they’ve done effectively.”

The $9.99 Yummm value deal, launched in July, has shown early signs of progress toward Pace’s goal of driving positive traffic. The company had previously been reluctant to join the value conversation, but Pace said it is important to respond to the dynamics of the marketplace, including consumers looking for such deals.

“The first step in building these layers was to address our weak competitive positioning and price point value offers. As we surveyed the competitive landscape, it was abundantly clear that price pointed value offerings under $10 are essential to help break through the noise to drive trial and consideration in today’s environment,” he said. “The Big Yummm Deal has been thoughtfully structured to offer trade-up opportunities like extra burger patties, bacon, avocado, or upgraded sides and beverages designed to help mitigate check pressure while still delivering strong value to guests.”

Chief financial officer Todd Wilson said about 9% of guests are ordering the Big Yummm deal.

“Which, from our lens, is a great thing,” he said. “It means people see the promotion, they see the value in it, and they’re choosing that option.”

To further drive traffic, Red Robin is rolling out proprietary, microtargeting tools in the third quarter to engage guests “more personally, precisely, and efficiently” than traditional broad-based messaging. Pace said this strategy is critical for Red Robin to compete with larger, more resourced brands.