Zacks Industry Outlook Highlights: BJ's Restaurants Inc., Darden Restaurants Inc., Buffalo Wild Wings Inc., McDonald's Corporation and Chipotle Mexican Grill Inc.

Zacks.com releases the latest Industry Outlook. Today, Zacks Equity Research discusses the Restaurants Industry, including BJ's Restaurants Inc. (Nasdaq: BJRI), Darden Restaurants Inc. (NYSE: DRI), Buffalo Wild Wings Inc. (Nasdaq: BWLD), McDonald's Corporation (NYSE: MCD) and Chipotle Mexican Grill Inc. (NYSE: CMG).

A synopsis of today's Industry Outlook is presented below. The full article can be read at http://at.zacks.com/?id=2678.

In the midst of what is expected to be a tepid recovery, there are three potential drivers of net income growth: Unit Expansion, Improved Same-Store Sales and Cost Cuts.

There seems little chance that upside will come from more aggressive unit expansion, as most of the companies have either scaled back or postponed further unit development. BJ's Restaurants Inc. (Nasdaq: BJRI) plans to grow the unit base by 12% in fiscal year 2009, much lower than 21% achieved in fiscal year 2008. Darden Restaurants Inc. (NYSE: DRI) expects to open 50 to 55 net new restaurants in fiscal year 2010, drastically down from 71 restaurants opened in the last fiscal year.

The second driver, same-store sales, consists of menu price increases and traffic counts. Any price increases other than minimal ones would drive away value-conscious customers in this fiercely competitive environment. Moreover, to enhance the perception of value and to drive traffic, companies are remodeling restaurants, with an up-market feel, and are rolling out new, smaller prototype restaurants that reduce construction and occupancy costs, and in turn boost returns on capital.

Finally, some of the cost cuts have been achieved through integrated information systems including point-of-sale, automated kitchen display, labor-scheduling and theoretical food cost systems. Restaurant companies try to optimize their restaurant operations and achieve decent restaurant operating cash flow margins.

Despite the restaurant industry facing the brunt of the economic downturn, there are defensive stocks in the industry promising long-term growth opportunities. Buffalo Wild Wings Inc. (Nasdaq: BWLD) offers investors one of the strongest growth stories in this space with growth target of 15% in units, 25% in revenue, and 20% to 25% in net earnings. The company has also been able to deliver positive comps consistently, when other restaurant operators are grappling with deteriorating same-store sales.

McDonald's Corporation (NYSE: MCD) with consistent earnings and healthy balance sheet provides relative safety and moderate growth in a turbulent environment and exposure to faster-growing international markets. Another stock, Chipotle Mexican Grill Inc. (NYSE: CMG), which remains largely unruffled by the slowdown, plans to open 120-130 restaurants in fiscal year 2009 -- a growth of 14.3%-15.5%.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2679.

About Zacks

The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks' clients before the beginning of each month.

The portfolios created monthly from 1988 through September 2006 exclude ADRS and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 -- Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.

SOURCE: Zacks.com

Zacks.com 
Mark Vickery 
312-265-9380 
Visit: www.zacks.com

Related terms: construction, dividends, earnings, e-mail, environment, equity, expansion, food, investment opinion, labor, nasdaq, nyse, profit, research, restaurants, revenue, sales, traffic, web