Red Robin Takes Hard Hit

Restaurant shares drop after missing second-quarter earnings estimates.
4:33 | 08/14/14

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Transcript for Red Robin Takes Hard Hit
I'm Susan -- only in Washington DC. As the financial markets close on Wall Street for Thursday August 14 this is story stock. And one stop with the story today is Red Robin the restaurant chain not pleasing investors when it missed second quarter earnings. Sending stocks tumbling down. To explain what exactly is turning investors blew over Red Robin I'm joined by Aaron task from Yahoo! finance. Aaron what's going on with the restaurant chain. Well you sixties and now they missed their numbers. And -- they say higher beef prices I think there are also suffering from the intense competition -- mean that you. You can't walk ten -- governing into some new burger joint. I'm including a company that's called burger joint. And -- lot of good -- options out there and red Robin gourmet burger has is suffering from the competition -- -- -- you know fact that well I've been there I've tried that I wanna try somebody else has -- And the stock just got hammered for that. Let's take a look at the two -- chart Aaron break it down for us. Down is the operative word here I mean this is you know falling -- the stock it's just. It's really I mean you know eighteen plus percent and one day you never want to see that with a -- it really tells you that there are a lot of week. Shareholders and that stock -- and they were caught off guard. About results from the company. Again did it there -- there wasn't something off really with the company's guidance because they missed. -- -- -- -- -- Buy it buy it by -- big number. And so you gotta wonder if there's a problem with what they're telling -- because that's how Wall Street. Builds their numbers but obviously there was just disappointment people -- sort of selling first -- -- -- ask questions later. So investors are saying Red Robin isn't using aggressive promotions. What does that mean exactly. Well look -- there's a lot of restaurants in that sort of fast casual space now you get a free -- Kaiser just to get you in the door war. -- with. TJ -- -- -- some of the other chains like olive garden we'll do these you know specials on Tuesday night where you can get you know an appetizer and entree and dessert. For a flat rate in those are the kinds of things that are appealing. To those consumers and and Red Robin just hasn't been very aggressive and that market -- I will note. That oftentimes when. A restaurant chain retailer does the aggressive promotions -- -- back to bite them because it hurts their margins. And then you've got your customer addicted as it were a few you know getting a great deal every time they come in the store so it it's. It's -- it's a double edged sword for sure but -- rob visiting player in the game right now. So is this just red -- problem are dissident industrywide trend. How well it usually it's not just their problem in there's been a number of of other restaurant chains. That have warned about higher food costs hitting their margins Papa John's. Being another one -- I think. If you -- to grocery shopping in your house -- -- -- sometimes in my house you've seen in a beef prices are up milk prices are up. Of bread prices are -- -- -- you every time you go to the grocery story of spending one more money. Well if if hear from material as a war. Is. Beef as is it Red Robin beef prices or an all time high and that's that's going to be a problem for you it's going to be a problem for any other company. In that industry and what I what I also noticed there's been the last couple years a number of stocks mostly to pull -- And the restaurant -- is fast casual space that have been incredibly well. That has resulted in a number of other companies coming public like pot belly and noodles and noodles -- -- another stock today that got hit really hard. That you I think -- recent over saturation point but the need to supply these -- of stocks is has overreached that demand for them at this. Point. A Red Robin was doing okay for these last two years or should we expected to pick back up soon. -- -- -- that they are saying that they. They they reiterated their outlook for the rest of the year so. If they're able to to meet the expectations from here on out people might look back at this is a one quarter anomaly that got hit by you know sharp spike in beef prices. But you know again when you see a stock go down this much in a single day does make you. Worry and wonder what else is hiding in there it's kind of like a cockroach VC one there's probably more and I know it's never -- -- -- a mixed cockroach metaphors you're talking a restaurant stocks but. Again as an investor you -- want to be careful here. Aaron -- from Yahoo! finance thank you for joining us. Houston watching the story stocks they would For your latest headlines I'm Susan -- only in Washington DC.

This transcript has been automatically generated and may not be 100% accurate.

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