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Ruth’s Hospitality Group beef costs begin to ease

Ruth’s Hospitality Group beef costs begin to ease

Company expects beef costs to fall 2 to 3 percent in the fourth quarter

Ruth’s Hospitality Group Inc. said Friday that its beef costs have started easing this month, and it expects those costs to fall 2 percent to 3 percent in the fourth quarter.

Ruth’s, based in Winter Park, Fla., operates the 145-unit Ruth’s Chris Steak House chain.

Speaking during Ruth’s earnings call Friday morning, chief financial officer Arne Haak said the supply of prime beef the company buys has increased this year, which has kept prices down. Although prices rose in the third quarter, they have fallen 2 percent year to date.

“This year has been a very favorable year,” Haak said.

Beef costs are broadly expected to be flat or to decline in 2016, executives said, as the herd of cattle finally enables ranchers to increase the supply of beef on the market. Yet executives are uncertain about what the market would look like for the supply of the type of prime beef the chain purchases.

Still, “It looks good,” Haak said. “We feel comfortable about the fourth quarter. We expect it to be down in the fourth quarter.”

Same-store sales rose 3.3 percent in the third quarter ended Sept. 27, Ruth's said. But all of the increase came from a 3.8-percent increase in average check. Traffic fell 0.5 percent in the quarter.

Company executives said traffic has rebounded so far in the fourth quarter, but Halloween is expected to slow traffic this weekend.

Third-quarter net income was $2.6 million, or 8 cents per share, compared with a net loss of $7.3 million, or 21 cents per share, in the same period a year ago. Revenue rose 8.8 percent, to $80.3 million, from $73.8 million in the same period a year ago.

Income from continuing operations rose 20 percent, to $2.6 million, from $2.2 million.

Ruth’s stock rose less than 1 percent in morning trading.

“The strength and consistency of our business has allowed us to reinvest in our core operations and support organic growth,” Michael O’Donnell, Ruth’s CEO, said in a statement.

The company has started offering new menu items at its restaurants this quarter, with plans to add them systemwide next year. The chain has also kicked off a remodeling program, which O’Donnell said will be a three- to five-year effort to increase capacity at its restaurants and improve the guest experience — what the company calls “Ruth’s 2.0.”

The company remodeled the first two restaurants in the third quarter, and expects to remodel a total of seven restaurants by the end of next year.

Ruth's expects to open a second location in Dallas next week, and has leases for three new restaurants next year in Albuquerque, N.M., Cleveland and El Paso, Texas. Franchisees are expected to open a restaurant in San Antonio, Texas, in November, and a new location in Indonesia next year, as well as Philadelphia and Canada.

Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze

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