Ruth’s Hospitality Group, Inc. has reported unaudited financial results for its first quarter ended March 27, 2011.
Highlights for the first quarter of 2011 compared to the first quarter of 2010 were as follows:
- Total revenues were $98.8 million compared to $94.7 million in the prior year.
- Net income available to preferred and common shareholders of $5.9 million, or $0.14 per diluted share, compared to $6.5 million, or $0.20 per diluted share, in the first quarter of 2010. Excluding a one-time $0.3 million net benefit in discontinued operations, net income was $0.13 per diluted share in the current period. Net income available to preferred and common shareholders for the first quarter of 2010 included a $0.7 million income tax benefit for a correction of an immaterial error related to certain prior year tax credits and a one-time $0.4 million net restructuring benefit. Excluding the adjustments, net income was $0.16 per diluted share in the prior year comparable period.
- Company-owned comparable restaurant sales for Ruth’s Chris Steak House increased 5.2%. Company-owned comparable restaurant sales for Mitchell’s Fish Market decreased 2.7%.
- Food and beverage costs, as a percentage of restaurant sales, increased 140 basis points to 30.7%, primarily due to unfavorable beef costs.
- Restaurant operating expenses, as a percentage of restaurant sales, decreased 190 basis points to 49.4%, primarily due to sales leverage on fixed costs.
- General and administrative expenses increased $0.3 million to $5.9 million.
- Depreciation and amortization expenses, as a percentage of total revenues, decreased 30 basis points to 3.8%, primarily due to sales leverage.
- Interest expense decreased by $0.5 million to $0.8 million in the first quarter of 2011.
- At the end of the first quarter of 2011, the Company had $45 million in debt outstanding under its senior credit agreement. This represents a reduction of $6 million from the December 26, 2010 balance of $51 million.
Michael P. O’Donnell, Chairman, President and Chief Executive Officer of Ruth’s Hospitality Group, Inc., stated, “We were pleased that our comparable sales momentum at Ruth’s Chris Steak House restaurants continued during the first quarter. These higher sales volumes helped us expand restaurant level margins, despite higher food costs. In late March, we rolled out a small price increase to mitigate the impact of commodity pressures. We believe the Ruth’s Chris brand has pricing power, but with five consecutive quarters of traffic growth, our goal is to remain prudent with additional pricing at this time. Our efforts to strengthen our balance sheet continued in the first quarter, as we reduced our outstanding debt by $6 million. We also remain active on the real estate front, as we continue to evaluate opportunities for 2012.”
Review of Operating Results
Total revenues, which include Company-owned restaurant sales, franchise income, and other operating income were $98.8 million compared to $94.7 million in the first quarter of 2010.
Company-owned restaurant sales increased 4.5% to $95.3 million for the first quarter of 2011 from $91.2 million in the same quarter last year. Total operating weeks increased 1.2% to 1,131 from 1,118.
Average weekly sales for Ruth’s Chris Steak House were $90 thousand in the first quarter of 2011 compared to $85.6 thousand in the first quarter of 2010. Average weekly sales at Mitchell’s Fish Market were $68.5 thousand compared to $70.5 thousand in the prior year first quarter.
For the first quarter of 2011, Company-owned comparable restaurant sales at Ruth’s Chris Steak House increased 5.2%, which consisted of an entrée increase of 3.9% along with an average check increase of 1.2%. Comparable restaurant sales at Mitchell’s Fish Market decreased 2.7%, which consisted of an entrée decrease of 6.1% and an average check increase of 3.5%.
Franchise income increased 4.3% to $3.1 million in the first quarter of 2011 from $2.9 million in the prior year first quarter. Comparable franchise-owned restaurant sales increased 9.3%.
Operating income was $10.0 million in the first quarter of 2011 compared to $9.8 million in the prior year first quarter. The first quarter of 2010 included a one-time $0.6 million restructuring benefit for which there was no comparable benefit in the first quarter of 2011.
Financial Outlook
Based on current information, Ruth’s Hospitality Group, Inc. is reiterating its previous 2011 outlook:
- Cost of goods sold of 30.5% to 31.5% of restaurant sales
- Marketing and advertising of 3.0% to 3.5% of total revenues
- General and administrative expenses of $23 million to $25 million
- Effective tax rate of 25% to 30%
- Capital expenditures of $10 million to $12 million
- Free cash flow of $21 million to $23 million
- Fully-diluted shares outstanding of 43.0 million to 44.0 million
Ruth’s Hospitality Group, Inc. (NASDAQ: RUTH) is a leading restaurant company focused exclusively on the upscale dining segment. The Company owns the Ruth’s Chris Steak House, Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse concepts. With more than 150 Company- and franchisee-owned locations worldwide, Ruth’s Hospitality Group, Inc. was founded in 1965 and is headquartered in Heathrow, Fla.