BJ's (BJRI)

American restaurant chain BJ’s Restaurants (NASDAQ:BJRI) fell short of the markets revenue expectations in Q3 CY2025 as sales only rose 1.4% year on year to $330.2 million. Its non-GAAP profit of $0.04 per share was $0.01 above analysts’ consensus estimates.

Company Overview

Founded in 1978 in California, BJ’s Restaurants (NASDAQ:BJRI) is a chain of restaurants whose menu features classic American dishes, often with a twist.

Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.

Competitors offering a full-service, casual family dining experience include Darden (NYSE:DRI), Dine Brands (NYSE:DIN), Brinker International (NYSE:EAT), and The Cheesecake Factory (NASDAQ:CAKE).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $1.39 billion in revenue over the past 12 months, BJ's is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale.

As you can see below, BJ’s sales grew at a sluggish 3.2% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as its restaurant footprint remained unchanged and it barely increased sales at existing, established dining locations.

This quarter, BJ’s revenue grew by 1.4% year on year to $330.2 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.6% over the next 12 months, similar to its six-year rate. This projection is underwhelming and implies its newer menu offerings will not accelerate its top-line performance yet.

Number of Restaurants

BJ's operated 219 locations in the latest quarter, and over the last two years, has kept its restaurant count flat while other restaurant businesses have opted for growth.

When a chain doesn’t open many new restaurants, it usually means there’s stable demand for its meals and it’s focused on improving operational efficiency to increase profitability.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.

BJ’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.3% per year. Given its flat restaurant base over the same period, this performance stems from a mixture of higher prices and increased foot traffic at existing locations.

In the latest quarter, BJ’s year on year same-store sales were flat. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if BJ's can reaccelerate growth.

Gross profit margins tell us how much money a restaurant gets to keep after paying for the direct costs of the meals it sells, like ingredients, and indicate its level of pricing power.

BJ's has bad unit economics for a restaurant company, signaling it operates in a competitive market and has little room for error if demand unexpectedly falls. As you can see below, it averaged a 14.7% gross margin over the last two years. That means BJ's paid its suppliers a lot of money ($85.28 for every $100 in revenue) to run its business.

BJ’s gross profit margin came in at 12.5% this quarter, in line with the same quarter last year. On a wider time horizon, BJ’s full-year margin has been trending up over the past 12 months, increasing by 1.1 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold

BJ’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 2.2% over the last two years. This profitability was lousy for a restaurant business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, BJ’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, BJ’s breakeven margin was in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

BJ’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, BJ's reported adjusted EPS of $0.04, up from negative $0.13 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects BJ’s full-year EPS of $2.07 to grow 6.7%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

BJ's has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.9%, subpar for a restaurant business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

BJ's historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3%, lower than the typical cost of capital (how much it costs to raise money) for restaurant companies.

BJ's reported $25.43 million of cash and $89.5 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $131.6 million of EBITDA over the last 12 months, we view BJ’s 0.5× net-debt-to-EBITDA ratio as safe. We also see its $5.16 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see BJ's beat analysts’ EPS expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. On the other hand, its revenue slightly missed and its EBITDA fell slightly short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $28.60 immediately following the results.

Updated: December 4, 2025 at 9:44 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in BJ's.

We see the value of companies helping consumers, but in the case of BJ's, we’re out. To begin with, its revenue growth was weak over the last six years, and analysts don’t see anything changing over the next 12 months. And while its decent growth in new restaurants shows it’s staying on track and slowly expanding its presence, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its gross margins make it more challenging to reach positive operating profits compared to other restaurant businesses.

BJ’s P/E ratio based on the next 12 months is 16.9x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $38.88 on the company (compared to the current share price of $37.66).