An unexpected leadership shakeup at BJ’s Restaurants Inc. has restaurant industry veterans coming on board to try and restart the company’s revenue growth.
The Aug. 28 departure of Chief Executive Greg Levin, who earlier this year entered into agreements with two activist funds, was a surprise, analysts said.
“Activists aren’t known for patience, but [the] CEO transition is surprising,” Wedbush Securities analyst Nick Setyan said in a note to investors.
“While questions remained unanswered under Greg Levin’s tenure, he was swimming upstream.”
PW Partners, which owns more than 5.4% of BJ’s common stock, said in March it would work to provide cost structure recommendations to the restaurant chain and its board as part of a six-month long plan.
Executives at BJ’s in prior analyst calls said they were discussing multiple initiatives “to enhance shareholder value” and drive top-line sales, such as a companywide store remodel project and strategies to improve its team service model (Nasdaq: BJRI).
Levin is now ending a 19-year run at BJ’s having started in 2005 as chief financial officer and entering the CEO role in late 2021. The executive was credited for scaling the deep-dish pizza brand to 217 locations in 31 states and “stabilizing and rebuilding” Orange County’s fourth-largest restaurant chain in the last few years.
“During his tenure, Greg has been instrumental in helping evolve BJ’s into one of the leading growth brands in casual dining,” Board Chair Lea Anne S. Ottinger said in a statement.
“I am proud of how we consistently focused on providing gracious hospitality and gold standard service to our guests, evolved to meet our guests’ and team members’ changing needs, and collectively helped establish BJ’s as a leader in the casual dining industry,” Levin said.
Since the Aug. 28 announcement, shares have fallen about 3.6% to $30.80 at press time.
In the past, the company set a goal to reach $2 billion in annual revenue and double store count to more than 400. Total revenues increased 3.8% to $1.3 billion in 2023; analysts expect only an 0.8% increase to $1.34 billion for 2024 and a 3.4% rise to $1.39 billion in 2025.
“Our long-term model for our business continues to be to drive top-line sales in this 8% to 10% range through a combination of 5%-plus unit growth and comparable restaurant sales in the low- to mid-single digits,” Levin told analysts in July.
The chain was expecting to open three restaurants this year as Levin focused on remodeling existing restaurants.
Core Menu
Darden Restaurants Inc. veteran C. Bradford Richmond, who has served on the BJ’s board since February, was named interim CEO. Richmond’s career includes over 20 years with Darden Restaurants Inc., where he last served as CFO from 2006 to 2015. He also held various finance positions at Red Lobster and Olive Garden.
“We want to give Mr. Richmond the benefit of the doubt until a permanent replacement is appointed,” Wedbush analyst Setyan said.
On Sept. 3, BJ’s made some more executive moves when the company named former brand president of Buffalo Wild Wings, Lyle Tick, as the chain’s president and chief concept officer. He started Sept. 9.
“Both Lyle and Brad hail from well-recognized, leading restaurant companies where they have demonstrated successful strategy development and implementation, growth in sales and profitability, and business model enhancements,” Ottinger said. “In addition, Lyle’s consumer goods experience brings an added perspective to foster the growth of our brand.”
Tick comes from On the Border Mexican Grill & Cantina, where he’s served as chief executive since December. He served in various marketing and brand strategy positions at Walgreens Boots Alliance, Bacardi and J. Walter Thompson.
Tick’s appointment comes as BJ’s sets a goal to increase marketing spend to drive awareness and “leverage additional sales,” Levin said during an analysts call in July.
Wedbush analysts expect Richmond to focus on cost efficiencies, as well as marketing the brand’s core menu.
“We believe there will be an incremental focus on brand building/marketing, an emphasis of BJRI’s differentiators (pizza and beer) that perhaps the brand went away from too much in recent years, and a continued focus on cost controls and lowering new unit build costs,” wrote Setyan, who gave an outperform rating with a $31.95 target price.
BJ’s reported fiscal second-quarter revenue of $349.9 million, compared to $349.7 million in 2023.
Attractive Sell?
Earlier this year, another investment firm Pleasant Lake Partners revealed its now 9.8% stake in BJ’s Restaurants, as well as a 31% stake in Irvine-based Tilly’s Inc. (NYSE: TLYS).
Pleasant Lake’s Fund 1 holds 2.3 million shares in BJ’s as of March, which it started purchasing between Nov. 20 and Jan. 17, when shares traded between $30 to $36 apiece during that time, according to a Jan. 18 SEC filing.
It is now the fourth-largest shareholder, following BlackRock, 17.4%, T Rowe Price, 14.6%, and Vanguard, 11% according to BJ’s 2024 proxy statement.
The activist investor was initially urging BJ’s to sell itself in February. The firm proposed that selling the company would be a “strategic alternative” in maximizing stockholder value compared to the chain’s more recent plans.
After its talks with the board, Pleasant Lake said it “is unconvinced that a stand-alone strategy would produce the best results for stockholders generally.”
BJ’s “would be attractive and highly accretive to multiple viable buyers if the process were well managed,” according to an SEC filing by Pleasant Lake’s Fund 1 Investments.
The fund eventually reached an agreement to cooperate with management and it was allowed to add Richmond to the board.
Setyan said: “In my opinion, the activists felt CEO Levin was not approaching cost cuts with an even larger sense of urgency.”
