Shares of Red Robin Gourmet Burgers (RRGB) are feeling the heat, crumbling 30% to $47.20 Tuesday.
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.
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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) , Wendy's (WEN) and Restaurant Brands International (QSR) , have all done really well. Even dining companies like Cracker Barrel (CBRL) , Denny's (DENN) and Darden Restaurants (DRI) are doing well. But others, like Cheesecake Factory (CAKE) , Ruby Tuesday (RT) and DineEquity (DIN) , have struggled.
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