7 Restaurant Stocks To Avoid Right Now

The first half of 2016 has gone by and same-store sales growth has been rather dull at the restaurant industry, given the difficult sales environment.

Despite economic growth, somewhat lower energy prices, and higher income, consumers have increased their spending on dining out only modestly, which resulted in low consumption over the last few months. The situation has been further aggravated by higher health care costs and still tightened credit availability in the U.S.

Moreover, unfavorable currency, a cooling Chinese economy and a tightening labor market have compounded the restaurateur’s woes. Traffic has been weak as well.

In fact, per a report by TDn2K’s Black Box Intelligence, the second quarter of 2016 was the second consecutive quarter in which the restaurant industry failed to produce positive comps growth. Same-store sales growth during the quarter dipped 0.7% year over year, following a 0.2% decline witnessed in the first quarter, thereby continuing the somber mood at the restaurant industry.

Thus, given the dwindling prospects of the restaurant industry, it would be wise for investors to reshuffle their portfolio, and get rid of stocks that may hurt returns.

7 Stocks to Shun Now

With the help of the Zacks Stock Screener , we have zeroed in on seven stocks in the Retail-Restaurants industry with a Zacks Rank #4 (Sell) or 5 (Strong Sell). Notably, these stocks are also witnessing downward revisions in estimates, which clearly indicate analysts' skepticism about their future performance.

Headquartered in Miami, FL, Fiesta Restaurant Group, Inc. (NASDAQ:FRGI) owns and operates quick-casual restaurants under the Pollo Tropical(R) and Taco Cabana(R) brand names in the U.S. Notably, the company reported mixed second-quarter 2016 financial results, wherein earnings lagged the Zacks Consensus Estimate while revenues were in line with the same.

Moreover, this Zacks Rank #5 company lowered its full-year 2016 comps guidance for both the brands. Further, over the past 60 days, the Zacks Consensus Estimate has decreased 11.8% for 2016 earnings, thereby adding up to the stock’s woes.

BJ's Restaurants, Inc. (NASDAQ:BJRI) owns and operates a chain of high-end casual dining restaurants in the U.S., which serve its signature deep-dish pizzas, salads, sandwiches, burgers, pastas, steaks and hand-crafted beers. Notably, this Zacks Rank #4 company posted weak second-quarter 2016 results, wherein both earnings and revenues lagged the Zacks Consensus Estimate.

Despite menu innovation and efficiencies derived from Project Q, the company’s comps declined and were softer than anticipated due to a difficult operating environment. Meanwhile, the Zacks Consensus Estimate for the company’s 2016 earnings has declined 8.5% over the last 60 days.

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BJ'S RESTAURANT Price and Consensus

BJ'S RESTAURANT Quote

CA-based restaurant operator DineEquity, Inc. (NYSE:DIN) operates under the Applebee's Neighborhood Grill & Bar and IHOP brands. Notably, this Zacks Rank #4 company reported mixed second-quarter 2016 results, wherein earnings came in line with the Zacks Consensus Estimate but revenues lagged the same.

Moreover, in view of the sales performance at Applebee’s and IHOP in the first half of 2016 and given its outlook for the second half, the company lowered its 2016 comps guidance for both the brands. Further, over the past 60 days, the Zacks Consensus Estimate has dropped 3.8% for 2016 earnings, thereby adding to the stock’s troubles.

Founded in 1969 in Seattle, WA, and made public in 2002, Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is a full-service casual dining restaurant chain that serves an assorted range of burgers. Red Robin reported lower-than-expected second-quarter 2016 results, with both earnings and sales missing the Zacks Consensus Estimate.

Moreover, the burger chain slashed its sales and profit outlook for the full year. Further, this Zacks Rank #4 company has been seeing a downward trend in earnings estimates. Over the past 60 days, the Zacks Consensus Estimate for 2016 earnings has decreased 7.4%.

Based in Plano, TX, Zoe's Kitchen, Inc. (NYSE:ZOES) began trading in Apr 2014 and operates as a fast casual restaurant concept serving Mediterranean-style food. Notably, the company reported mixed second-quarter 2016 financial results, wherein earnings were in line with the Zacks Consensus Estimate while revenues lagged the same.

Meanwhile, this Zacks Rank #4 company slashed its revenue and comps guidance for full-year 2016. Moreover, the Zacks Consensus Estimate for the company’s 2016 earnings has slumped 28.6%, over the last 60 days.

Headquartered in Dallas, TX, Fogo de Chao, Inc. (NASDAQ:FOGO) owns and operates Brazilian steakhouses. It offers beef, lamb, chicken, pork and seafood items as well as liquor, beer and wine. Notably, this Zacks Rank #4 company posted lower-than-expected second-quarter 2016 results, wherein both earnings and revenues lagged the Zacks Consensus Estimate.

Moreover, given the softening sales environment, the company has trimmed its full-year 2016 revenue and comps guidance. Also, the Zacks Consensus Estimate for the company’s 2016 earnings has slumped 8.5%, compounding its woes.

Based in Irvine, CA, The Habit Restaurants, Inc. (NASDAQ:HABT) is the operator of The Habit Burger Grill, a burger-centric fast casual restaurant company. It is engaged in preparing char-grilled burgers, sandwiches and salads.

Notably, this Zacks Rank #4 company posted mixed second-quarter 2016 financial results, wherein earnings lagged the Zacks Consensus Estimate while revenues were in line with the same. Moreover, the Zacks Consensus Estimate for the company’s 2016 earnings has declined 9.4%, over the last 60 days.