Why Red Robin Gourmet Burgers, Inc. Stock Plunged 20.5%

What happened

Shares of restaurant Red Robin Gourmet Burgers (NASDAQ: RRGB) were hit hard on Wednesday after the company reported its fiscal first-quarter results. Shares fell as much as 20.5%, but are down about 19% at 11:24 a.m. EDT.

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Bearishness toward the stock on Wednesday is likely because the company's revenue and adjusted earnings per share for the quarter were below the consensus analyst estimates for the two key metrics. But management's unimpressive guidance for its fiscal second quarter probably didn't help either.

So what

For its first quarter of fiscal 2018, Red Robin reported revenue of $421.5 million, up just 0.2% year over year. On average, analysts were expecting revenue of about $425 million. Adjusted earnings per share fell from $0.89 in the year-ago quarter to $0.69, coming in well below a consensus estimate for first-quarter adjusted earnings per share of $0.75.

Red Robin's weak revenue growth came as comparable-restaurant revenue fell 0.9% year over year, "driven by a 1% decrease in average guest check, partially offset by a 0.1% increase in guest counts," management said in Red Robin's first-quarter earnings press release.

Though Red Robin CEO Denny Marie Post admitted the company's "sales were disappointing," she also noted that the restaurant chain continued to gain market share since its casual-dining traffic outpaced sector trends by 230 basis points.

Now what

Another area of concern for investors may be Red Robin's outlook for its fiscal second quarter. Management said it expected second-quarter earnings per share to be between $0.55 and $0.75. Yet the average analyst estimate for Red Robin's second-quarter earnings per share was $0.75 -- the top end of management's guidance range for the metric.

Looking ahead, Red Robin is "taking steps to improve sales and traffic trends while continuing to make strides on productivity, which is critical to ensure we can deliver great service and value despite rising costs," said the company's CEO.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.