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Ruth's Hospitality narrows 3Q loss

Steakhouse sales rise as company heads into holiday season

Ruth's Hospitality Group Inc. said Friday that improving sales at its steakhouses in recession-roiled California and Florida helped the company narrow its losses in the third quarter.

For the quarter ended Sept. 26, Ruth's reported a loss of $477,000, or 1 cent a share, compared with a loss of $954,000, or 4 cents a share, in the prior-year period. Revenue rose 4.9 percent, to $79.8 million from $76.1 million, with increases in both restaurant sales and franchise income.

Same-store sales at Ruth’s Chris increased 4.9 percent in the third quarter, the chain's strongest showing since the fourth quarter of 2006, the company said. Same-store sales at Mitchell’s Fish Market, which had been positive from December 2009 to the second quarter of 2010, decreased 2.8 percent.

“Currently, October’s comp trends are positive in the middle-single-digit range for Ruth’s Chris and Mitchell’s remain negative in the low-single-digit range,” Mike P. O’Donnell, president and chief executive of Ruth’s, said in a call Friday with analysts.

“On a geographic basis, Ruth’s Chris’ two largest markets — California and Florida — both generated positive sales for the quarter,” O’Donnell said, noting that sales in Florida rose 3.4 percent and improved 2.6 percent in California.

“Overall in the Ruth’s Chris portfolio, 50 of the 64 company locations generated positive comparable sales in the third quarter,” he added, “which underscores the stability of the brand’s top-line recovery.”

In the Ruth’s franchise system, domestic same-store sales increased 6.2 percent and international same-store sales rose 9.2 percent. The blended average was 6.8 percent.

More highlights from the conference call:

- Private dining increases. Private-dining sales at Ruth’s increased about 18 percent in the quarter. “We continue to make inroads with our catering and professional-satellite businesses,” O’Donnell said.

- Holiday party bookings. Holiday party reservations are up 17 percent over last year. “We are looking forward to our most successful holiday private-dining season since 2007,” O’Donnell said.

- Discounting. “Relative discounting certainly remains a factor of Ruth’s Chris in this environment, but we are comfortable with our current strategy, execution and messages,” said O’Donnell. Ruth’s Classics program, offering $39.95 and $49.95 prix-fixe meals, have become mainstays on the menu, he said. On Nov. 1, the offerings will be updated seasonally. “We would expect Classics to continue to represent about 30 percent of our sales mix,” he said.

- Price increases. A “modest” price increase was made on a limited number of items in the third quarter. Annualized, O’Donnell said, the effect will be about $1 million in sales with no change in mix.

- Development. Ruth’s is seeking more partners in the casino and hotel industries. “Both the gaming and hospitality environments offer us many favorable attributes such as captive audience, potential guests and more limited investment risks,” he said.

- Traditional development. The company is focused on the West Coast and the Northeast, O’Donnell said, “as these regions generate the highest average volumes in our current portfolio.”

- Beef prices. Robert Vincent, Ruth’s chief financial officer, said the company saw beef-price inflation in the third quarter of about 2 percent, with pressure on the prime side. The company has about half of beef locked in contracts, he said, and is looking to lock contacts for 2011 by late January or early February.

- Alcohol beverage sales. The number of wine-sales transactions are up year-over-year, Vincent said, “but the average selling price overall is down.”

- C-suite changes. The company announced that O’Donnell, who has been president and chief executive since April 2008, assumed the additional role of chairman, succeeding Robin P. Selati, who is taking on the new title of lead director.

Heathrow, Fla.-based Ruth's Hospitality owns and franchises more than 150 restaurants, under the Ruth’s Chris Steak House, Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse concepts.

Contact Ron Ruggless at [email protected].

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