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This "Red" Burger Joint Is Showing Lots of Green

Nickey Friedman
November 12, 2013

Juicy burgers, spicy wings, and thick burritos. Lately, Americans can't get enough of them. For an economy that's supposedly doing poorly, there's been a lot of scarfing down of "man food." With the announcement of its third-quarter earnings, Red Robin Gourmet Burgers (NASDAQ: RRGB) joined the ranks of Buffalo Wild Wings (NASDAQ: BWLD) and Chipotle Mexican Grill (NYSE: CMG) by reporting knock-out results that sent its stock soaring to all-time highs.

Total revenue jumped 8.1% to $230.7 million at Red Robin, and same-store sales hopped up 5.7%. Net income shot up 34% to $4.7 millio,n or $0.32 per share. CEO Steve Carley credited the success to changes in menu, presentation, new marketing approach, and brand focus. It's clearly paying off--guest traffic has never been higher.

During the quarter, Red Robin bought back 36,888 shares, spending $2.5 million. That's over half its net income returned to shareholders through stock buybacks. Red Robin's management must be quite confident about the future and must consider its stock cheap. It ended the quarter with only $18 million in cash compared to $90.9 million in debt, yet it still decided investing in its own stock was a better financial decision than paying down debt. Actions such as that tend to speak louder than any words can about an optimistic future.

The conference call added a bit more color. Red Robin Gourmet Burgers confessed there is "current weakness in the casual-dining sector," but it was able to rise above it. This marked the sixth straight quarter of increased guest count and market share. One of the reasons for its gain was the succ