HEATHROW Fla. Ruth’s Hospitality Group Inc. on Monday reported a steep drop in fourth quarter same-store sales at its namesake steakhouse chain and said it was in danger of violating one of its lending covenants.
Following the news, shares in Ruth's Hospitality tumbled more than 33 percent Monday to $1.42.
The company, which operates or franchises more than 150 restaurants under the Ruth’s Chris Steak House, Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse brands, said that sales at company-owned restaurants for the fourth quarter ended Dec. 28 were $96.9 million, up 14.2 percent from the year-earlier quarter. That figure includes $19.4 million in revenue from the Mitchell’s concepts, which were acquired for $92 million in February 2008.
Same-store sales at company-owned Ruth’s Chris Steak House units fell 18.5 percent for the fourth quarter, compared with a 5.6-percent decrease a year earlier, the company said. At Mitchell’s, the company said average weekly sales for the quarter were $679,000, down 17.6 percent from the same quarter a year ago.
Ruth's Hospitality said it had $160.2 million of debt outstanding at the end of its fourth quarter, and added that it likely would not be in compliance with the leverage covenant under its senior credit facility after failing to complete the sale of its corporate headquarters as planned.
Officials had said in late October 2008 that they would undertake asale and leaseback of Ruth's corporate support center in Heathrow that was expected to generate $12 million and close by late December
“We have proactively engaged our lenders and are working diligently with them to find a constructive solution over the next 30 to 60 days,” Michael P. O’Donnell, chief executive and president of Ruth’s Hospitality, said in a statement Monday.
The company said it would release full results for the fourth quarter in mid-February. Those results are expected to reflect nonrecurring severance charges related to the departures of several executives and a restructuring undertaken in late October, the company said.