Zacks Investment Research downgraded shares of BJ's Restaurants Inc. (BJRI) from NEUTRAL to UNDERPERFORM on November 21, 2012, with a target price of $30.00.
We remain cautious on the stock based on the top- and bottom- line miss as well as the decelerating growth in comps and margins in the third quarter. The slump in broader market has taken a toll on BJ's performance in the quarter. A set of macro issues like the national political conventions and higher gasoline prices in California kept consumers more home bound and less inclined to dining out in October which will likely subdue its fourth quarter comps. A higher cost structure mainly related to payroll taxes, marketing spend and kitchen wages is expected in the fourth quarter of 2012. Going forward, an increased level of pre-opening costs and stiff competition is also expected with the company's foray into the new market. A relatively smaller scale and lack of advertising strength compared to its larger peers is another negative for BJ's. Hence, we downgrade the recommendation from Neutral to Underperform.
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