HEATHROW Fla. Citing a difficult economic environment, Ruth's Chris Steak House Inc. lowered its earnings guidance for 2007 and tempered expectations for 2008. It also said Thursday that it does not foresee a significant turnaround for the restaurant industry until at least the second half of next year.
The company said Thursday it now expects earnings to total between 79 cents per share and 81 cents per share, compared with its prior expectations of per-share profit between 92 cents and 95 cents. In fiscal 2006, Ruth’s Chris earned $1.02 per share.
The company also said its same-store sales for the current year would be flat from a year ago. It had earlier projected a year-over-year same-store sales increase of between 0.5 percent and 1.5 percent.
Same-store sales are down 4 percent during the current fourth quarter because of reduced traffic and a “softer” check average, management said in a statement.
“Our fourth-quarter sales shortfall is the primary factor behind our lowered earnings guidance for fiscal 2007, as we believe we are effectively controlling manageable costs,” said Craig S. Miller, chairman, chief executive and president.
Miller indicated that the chain has “a number of initiatives underway to spur guest traffic,” but did not elaborate.
Full-year revenue from continuing operations is expected to total between $320 million and $322 million for the 52-week fiscal 2007, an increase of as much as 18.6 percent from $271.5 million in revenue booked for the 53-week fiscal 2006, the company said.
The upscale-steakhouse company said its 2007 food and beverage costs, as a percentage of restaurant sales, should total about 32 percent, a 0.3-percent improvement from 2006. However, it indicated that comparable-restaurant operating margins narrowed by 0.8 percent during the year and that margins for new restaurants averaged 4-percent below the gauge for other stores.
Ruth’s Chris said it met its 2007 development goals of opening eight corporate units and nine franchised restaurants, raising its total unit count to 118 locations. Yet, an earlier-than-expected opening of a store in West Palm Beach, Fla., eroded earnings by 2 cents per share because of additional pre-opening costs, the company said.
Additional costs related to Ruth’s Chris’ pending $94 million acquisition of 19 seafood restaurants and three steakhouses from Cameron Mitchell Restaurants shaved another 2 cents from its annual per-share earnings. An interest rate swap cut yet another 2 cents, the company added.
Ruth’s Chris said it expects to continue to feel the pressure of a trying economic environment through at least the first half of 2008. It forecast that same-store sales would range from flat to down 2 percent. Growth in per-share earnings for the year would likely fall below the company’s long-term growth target of 17.5 percent, it said. More specific 2008 guidance will be included when the company posts fiscal 2007 results in February.