Surprisingly, this isn't new 52-week lows, although Red Robin stock was just 50 cents per share away from hitting those levels when it was at session lows of $45.70. Speaking on CNBC's "Stop Trading" segment, TheStreet's Jim Cramer asked, what should restuarant stocks do at this point?
Should the restaurant companies who are struggling take a pause in their expansions and look to see what's really going on in the industry? Perhaps see what they can do differently with a consumer that more and more is opting to stay in or order carry-out?
Well they could tell that -- the truth -- to Wall Street, but then the stock gets hammered like Red Robin's, Cramer noted. The company missed on earnings per share and revenue estimates for the fiscal third quarter. Management wants to take a closer look at where it can improve, but Wall Street isn't on board with the strategy.
- McDonald's Is Beating the Pants Off These Guys -- but Not the Ones You Think
- Wall Street Hates Chipotle
- McDonald's CEO Steve Easterbrook Is Blowing Minds
So restaurant operators are left with two options: Continue expanding despite concerning business trends or stop expanding in an effort to find the root cause and see their stock price get drilled as a result, explained Cramer, who also manages the Action Alerts PLUS charitable trust portfolio.
It's been a mixed year for restaurant operators. Some, like McDonald's (MCD) - Get Report , Wendy's (WEN) - Get Report and Restaurant Brands International (QSR) - Get Report , have all done really well. Even dining companies like Cracker Barrel (CBRL) - Get Report , Denny's (DENN) - Get Report and Darden Restaurants (DRI) - Get Report are doing well. But others, like Cheesecake Factory (CAKE) - Get Report , Ruby Tuesday (RT) and DineEquity (DIN) - Get Report , have struggled.
More of What's Trending on TheStreet:
- The 3 Most Important Things to Watch for in Snap's Earnings
- Astounding 98% of Financial Stocks Are Up Since Trump Got Elected
- Disney CEO Bob Iger Would Forever Secure His Legacy With Fox Deal
- 5 Huge Questions Raised By Broadcom's Bid For Qualcomm (Intel Should Worry)
At the time of publication, Cramer's Action Alerts PLUS had no position in any security mentioned.