Why BJ's Restaurants Shares Tumbled

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of BJ's Restaurants were getting sent back to the kitchen today, falling as much as 13% after the company reported another disappointing quarter.

So what: Despite sales growth of 10% to $198.5 million in the quarter, net income actually slid 4% to just $0.30, a penny below analyst projections. Revenue also missed the consensus at $202.5 million. Higher occupancy and depreciation costs were the major reason for the drop in profits, but same-store sales were also flat, a warning sign that the company may only be able to grow sales through adding new stores.

Now what: BJ's is essentially an expansion play for investors as the company plans to increase its store count 13% this year from 136 to 153. Management believes there is room in the market for 425 more BJ's locations, but the flat same-store sales figure forces the market to question the actual demand for more BJ's restaurants. With the foodie revolution and the rise of fast-casual stars like Chipotle and Panera, chains like BJ's seemed destined to lose customers no matter how many locations pop up. I'd leave this one on the back burner.

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The article Why BJ's Restaurants Shares Tumbled originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends BJ's Restaurants. The Motley Fool owns shares of BJ's Restaurants. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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