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$RRGB's restaurant labor costs increased 170 BP to 35.2% in 1Q17, driven by minimum wage increases and higher restaurant bonuses. Capital expenditures were $24.5MM, primarily related to new restaurant openings, restaurant maintenance capital, investments in technology products and remodel. $RRGB does not expect to buyback its shares in 2017.
During 1Q17, $RRGB's restaurant revenue rose $24.8MM. This increase was mainly due to new restaurant openings and acquired restaurants. Franchise and other revenues fell $0.3MM, due to loss of royalties from 13 franchised restaurants acquired during 1Q16.
$RRGB announced preliminary results for 4Q16. The company expects to report total revenues of approx. $290.8MM, a comparable restaurant revenue decrease of 4.5% and a comparable guest count decrease of 2.9% for 4Q16. These results are subject to year-end closing adjustments.
$RRGB said its CFO and EVP Stuart Brown will resign from the position effective July 15, 2016, to accept an opportunity outside the restaurant industry. Terry Harryman, its VP, CAO and Controller, will serve as interim CFO effective immediately following Brown's departure, while $RRGB conducts a comprehensive search.
Storage services provider $IRM said CFO Roderick Day will be leaving the company due to personal reasons. Day will step down as CFO immediately following the filing of Form 10-Q, but will remain with the company through mid-Oct. for transition purposes. Stuart Brown, currently CFO of $RRGB, will join $IRM around July 25 and will replace Day.
Peter Saleh of BTIG asks about regional disparities affecting $RRGB's comps. CEO Steve Carley said $RRGB's market-by-market performance was stronger in the Southern markets, Southwest and Southeast. The company has underperformed a bit in the Northeast but with brand recognition and remodels, it sees opportunities to improve these trends.
Imran Ali of Wells Fargo Securities asks about commodity deflation and about $RRGB's expectations for the same. CFO Stuart Brown said 1Q16 COGS deflation was around 4%. For 2016, $RRGB expects COGS deflation of around 1% and there are some inflation expectations for 2H16 on ground beef. $RRGB expects labor inflation to be about 4.5-5%.
Will Slabaugh of Stephens asks about $RRGB's value platform. President Denny Post said $RRGB continues to see strong responsiveness to its segmented offers and will use these. The guests are also seeing value in the ongoing loyalty program. There is also opportunity in the Tavern platform for creating news around everyday value for $RRGB.
$RRGB said 1Q16 EBITDA increased 8.5% to $51MM, adjusted to exclude the impact of the litigation contingencies, restaurant impairment costs and benefit from changes to gift card breakage estimates. Restaurant level operating margins were 22.5%. Adjusting for change in benefit claims costs, operating margins rose 30BP despite lower comp sales.