Ruth’s Hospitality Group Inc. on Friday reported same-store sales growth in the first quarter of 2013, but executives remain cautious as the company continues to face rising beef prices.
Same-stores sales increased 6.6 percent at the group’s 63 company-owned Ruth’s Chris Steak House restaurants during the March 31-ended first quarter, marking its 12th consecutive quarter of same-store sales growth. Sales were driven by a 2.9-percent increase in traffic and an average check boost of 3.6 percent.
At the group’s 19 company-owned Mitchell’s Fish Market restaurants, same-store sales increased 1.5 percent. Traffic increased 2.7 percent at the brand while average check decreased 1.2 percent.
During a call with analysts on Friday, chairman, president and chief executive Michael P. O’Donnell attributed Ruth’s Chris’ strong traffic and same-store sales to its consistency of service, as well as its Ruth’s Seasonal Classics menu, which gives consumers three courses for a fixed price. “These prefixed selections comprised approximately 20 percent of sales in the first quarter, consistent with the trends that we saw on the fourth quarter,” he said
The large bump in same-store sales at Ruth’s Chris was likely also due to the fact that Easter — a big holiday for the upscale chain — fell within the quarter this year, O’Donnell said. He added that the brand's Sizzle, Swizzle and Swirl Happy Hour has also helped drive traffic without poaching sales from its core menu by giving customers another reason to drop by Ruth’s Chris.
“This offering gives us an opportunity to not only drive incremental sales at a traditional happy hour but continues to turn many first-time, often younger, guests into Ruth's Chris regulars, while contributing to our overall sales growth,” he said.
Still, the company faces difficulty with rising beef prices, O’Donnell acknowledged. Beef costs rose approximately 1 percent year-over-year and rose more than 17 percent over a two-year period.
Menu prices at Ruth's Chris rose by about 2 percent during the quarter, and the company will mitigate price increases in coming quarters to maintain value for the customer, he said.
“While we believe we have additional pricing power, we will continue to be thoughtful and prudent, with respect to future increases,” he said. “It is still our strategy to focus on growing sales primarily through traffic to maintain our value orientation.”
The company has contracted 40 percent of our beef needs for the remainder of the year at prices that average 4 percent to 6 percent above last year’s prices, according to company executive vice president and chief financial officer Arne G. Haak.
During the quarter the company reported net income of $7.7 million, or 22 cents per share, compared with a net loss of $30.3 million, or negative 89 cents per share, in the prior-year period. The discrepancy between the first quarter of 2012 and that of 2013 was “due to the refinancing of our credit facility and subsequent retirement of the company's preferred shares,” said Haak.
Total revenue for the quarter was 107.4 million, compared with 100.3 million during the first quarter 2012.
Winter Park, Fla.-based Ruth’s Hospitality Group is the parent company of Ruth’s Chris Steak House, Mitchell’s Fish Market, Mitchell’s Steakhouse and Cameron’s Steakhouse. The company operates or franchises more than 150 restaurants systemwide.
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