Ruth’s Hospitality Group will continue to focus on value through the promotion of its fixed-price meals and a new cable TV advertising campaign for Ruth’s Chris Steak House, officials said in an earnings call Wednesday.
Net income for the company, which also operates the Mitchell’s Fish Market chain, rose to $85,000, or zero cents per share for the third quarter ended Sept. 25, compared with a net loss of $477,000, or a 1 cent per-share loss, a year earlier.
Revenue rose 2 percent to $80.2 million, compared with $78.6 million a year earlier.
The company reported its sixth consecutive period of same-store sales increases at Ruth’s Chris and the seventh straight quarter of traffic gains.
EARLIER: As beef costs rise, Ruth’s Chris aims to build traffic with TV ads
Same-store sales at company-owned Ruth’s Chris Steak House locations rose 2.4 percent. Chief executive Michael O’Donnell noted that Hurricane Irene negatively affected that figure by about 0.5 percent, due to a heavy increase in cancellations the weekend the storm hit the East Coast.
Same-store sales for Ruth’s Chris domestic franchised units increased 5.2 percent in the quarter, and international franchised locations generated a 10.1-percent same-store sales gain.
Same-store sales for company-owned locations of Mitchell’s Fish Market declined 0.7 percent in the quarter.
The seasonal Ruth’s Classics fixed-price menu once again was a big contributor to sales, accounting for 30 percent of the mix, O’Donnell told investors during the third-quarter conference call. The chain recently raised the bottom tier of the meal’s pricing structure to $40.95 from $39.95, allowing Ruth’s to offset higher commodity costs for beef.
Even though that has caused a favorable shift, with more orders of the Ruth’s Classic deal coming at the higher $49.95 tier, the brand will be judicious with further menu price increases, O’Donnell said.
“Our strategy has been to be as cautious as we can be on price and protect our traffic growth,” he said. “It doesn’t bother me to be the least expensive house in the most expensive neighborhood. We do think we have pricing capability, which we’ve taken in the lower end of our [fixed price], but we like to pull those levers last.”
The company is forecasting commodity inflation for beef in the 7-percent to 10-percent range in 2010. If prices don’t rise to that level, Ruth’s Hospitality Group likely would be less aggressive on pricing, O’Donnell said, though the company would have to revisit the strategy if inflation soars higher than expectations.
The fourth quarter also is expected to reap the benefit of Ruth’s first concerted TV advertising push. Commercials focused on the guest experience at a Ruth’s Chris Steak House debuted in early October and will run on national cable for seven weeks, O’Donnell said.
“An expansive use of TV is an effective traffic driving tool. The spots will continue to focus an experience-focused theme,” O’Donnell said. “We believe that television advertising will continue to reach new and existing customers.
“In fact, we’ve seen a significant increase in visits to our website since the campaign began. But it’s still too early in the campaign to comment on conversion to reservations,” he said. “But we’re very encouraged with our progress.”
To improve traffic at its Mitchell’s Fish House brand, Ruth’s will continue to add more steaks, chicken and burgers to the menu, as well as promote the fixed-price menus for $19.95 and $24.95.
“Given the seasonality of seafood and the expansion of our nonseafood offerings, we see the [fixed-price] and limited-time offers as a way for our guests to always have something new to experience when dining with us.”
Winter Park, Fla.-based Ruth’s Hospitality Group operates or franchises more than 120 Ruth’s Chris Steak House restaurants, as well as 20 Mitchell’s Fish Markets, two Mitchell’s Steakhouses and one Cameron’s Steakhouse.
Contact Mark Brandau at [email protected].
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