FOLLOW THE MONEY – January 15, 2026
Our macro view this month consists only of expressing our pleasure to have provided you with a relevant perspective in relation to the “real money”, namely gold (and the gold miners, in turn). You are likely aware that gold bullion was up 64% last year and the gold miners were up over 150%, and some of you hopefully profited from that. We believe the causative factors, which this column will continue to discuss monthly, will drive precious metal related prices much higher over time.
A lookback at this column of ten months ago provides some always worthwhile humility as well as fresh insight. We suggested that the widespread bargain valuations provided some especially interesting low priced turnaround situations and we pinpointed Red Robin Gourmet Burgers (RRGB), Noodles & Co. (NDLS) and The One Group Hospitality (STKS). They were trading at $4.50, $1.25 and $2.60, all down at least 75% from their highs. We pointed out that “they all have debt, but operating earnings seem capable of debt service as well as supporting operating ‘adjustments’…each is blessed with credentialed management.”
At Red Robin, while Adjusted EBITDA has come through approximately as expected, traffic and sales, while “promising”, have been no better than flat through Q3’25, in spite of all the undoubtedly worthwhile initiatives put in place over 5 years by now departed CEO, G.J. Hart, and CFO, Todd Wilson. Newly installed CEO & President, David Pace (previously Chairman of the Board, with 35 years of industry experience), remains optimistic, though admitting “…we’re still in the early innings of our transformation.” At the same time, a “shelf offering” or “ATM Program” for up to $40M has been put in place. RRGB trades at $4.10 currently, down 9% since March.
At Noodles, we summarized: “Since early ’24 Drew Madsen (previously with Darden and Panera) has led a far-reaching rejuvenation plan, and it is beginning to bear fruit. After positive results from 3 new entrees introduced 6 months ago and very encouraging testing of an additional nine items, judgement time has arrived……previous management’s prediction of $40-50M EBITDA was premature but the current plan seems more soundly based.” With $109M of long-term debt and trailing EBITDA of about $24M, a dozen closings had prudently been announced and capex cut back to about $20M. In spite of positive comp sales and traffic in Q3, an investment banking firm was engaged to evaluate strategic alternatives. Between ’25 and ’26, total closings will have been over 60 units and capex will continue to be closely controlled. In the course of it, CEO, Drew Madsen has been replaced by an apparently well qualified Joe Christina and P/E activist, Galloway Partners, has taken a 6.1% stake. Q4 Comp sales were just reported up an encouraging 7%, but NDLS, up 14% on Monday, is still only $0.86, down 31% since March.
At The One Group Hospitality, the STK brand had continued to be very profitable and the newly purchased Benihana chain looked good to us. We summarized “CEO, Manny Hilario has a proven track record, taking EBITDA from $10M in 2018 to over $40M by 2021, and paying for the 2019 purchase of Kona Grill in about three years. The two primary expansion vehicles are STK and Benihana and there appears to be an especially interesting franchising opportunity at Benihana….the enlarged Company is expected to generate over $100M of Adjusted EBITDA in calendar ’25….the balance sheet now includes $300M oof long term debt and $160M of (13%) preferred stock, the operating cash flow seems capable of debt service and building EBITDA by 15%/yr.” At this point: Kona’s comps have weakened sufficiently that cash flow from the Grill segment is negligible. The STK chain’s traffic trends have turned positive, though the more value-driven menu has left the comps modestly negative. Benihana’s potential is very much in place, the several newest openings are apparently doing well, and the franchising effort has started to bear fruit. However, while sales and traffic at Benihana have been generally maintained in the eighteen months of ownership, the challenging macro environment has precluded traffic or margin improvement. While $100M of corporate EBTIDA is sufficient to service debt as well as grow stores, the Company has indicated an intensified effort to control capex by way of real estate conversion, including Kona or RA Sushi to STK or Benihana. Overall, the investment community is waiting to see sales and margins improve, as well as more dramatic progress at Benihana. After an encouraging Q4 report this past Monday, on which the stock went up 24%, STKS is still down 8% since March.
With the jury still out, the situations above reiterate the unforgiving nature of the current “meals prepared away from home” environment. Management of all have had impressive credentials, and each is more than adequately incentivized. We have no reason to doubt the dedication they brought to the task & GJ Hart, Drew Madsen & Manny Hilario did not forget how to run restaurant companies. However, when the escalator is trending in the wrong direction, management must work smarter and harder than ever to make it to the top.
Roger Lipton
