Ruth’s Hospitality Group Inc. said it would continue to look for traffic drivers to mitigate rising beef costs, including plans to test TV advertising for its flagship steakhouse brand.
Executives at the Heathrow, Fla.-based company said Friday that higher traffic at Ruth’s Chris Steak House, combined with a price increase, had already helped counteract escalating commodity costs in the March-ended first quarter.
Same-store sales were up 5.2 percent at corporate Ruth’s Chris restaurants for the quarter, which officials said marked the fifth consecutive quarter of traffic growth for the steakhouse chain.
To further drive traffic, the company has started testing TV advertising for Ruth’s Chris, Michael P. O’Donnell, chairman, president and chief executive, said during a conference call Friday with securities analysts. Test started late in the first quarter, and O’Donnell said the company would likely devote more resources to TV ads in the second half of the year.
”The notion of the television advertising and advertising itself become like heroin, you need more and more every year,” O’Donnell said during the call, according to a transcript provided by SeekingAlpha.com
He added: “What we're doing now, honestly, is looking at, what does it do to traffic, what does it do to sales. And more importantly, by virtue of doing work around ads and usage, what it tell us [about] our consumers.”
Average checks at Ruth’s Chris rose 1.2 percent for the quarter, which included a “small” price increase, the company said. However, O’Donnell noted during the conference call that Ruth’s would remain cautious about additional price hikes moving forward.
“I like being the least expensive house in the wonderful neighborhood,” he said. “And so the idea that we can keep our pricing down is something that we think has been contributing to the increase in traffic.”
For the first quarter, Ruth’s Hospitality said its net income totaled $5.9 million, or 14 cents per share for the quarter, compared with $6.5 million, or 20 cents per share, in the same quarter a year ago. Revenue rose 4.2 percent to $98.8 million, according to the company, which operates or franchises 150 restaurants under the Ruth’s Chris, Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse brands.
Same-store sales declined 2.7 percent at Mitchell’s Fish Market in the quarter, which Ruth’s Hospitality blamed on a shift of the Easter holiday.
The company said strong catering business contributed to positive same-store sales during the quarter at Ruth’s Chris, as did improving sales in the chain’s two largest markets, Florida and California. O’Donnell said sales were up 1.1 percent in Florida and up 6.8 percent in California.
Contact Alan Snel at [email protected].