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Landry’s to acquire Mitchell’s Fish Markets for $10M

Landry’s to acquire Mitchell’s Fish Markets for $10M

Owner Ruth’s Hospitality Group to focus on its core steakhouse concept

Ruth’s Hospitality Group Inc. has reached an agreement to sell its Mitchell’s restaurants to Landry’s Inc. for $10 million, significantly less than the $92 million Ruth’s paid for the concept, Winter Park, Fla.-based Ruth’s said Monday.

The deal includes 18 Mitchell’s Fish Market locations and three Cameron’s Steakhouse units. The sale is expected to close within 75 days, and enables Ruth’s to concentrate on one concept, Ruth’s Chris Steak House. In addition to the sale, Ruth’s said it plans to repurchase as much as $50 million in company stock.

“While the Mitchell’s restaurants continue to be profitable and generate positive cash flows, the sale of these restaurants will enable us to direct all of our resources toward the continued growth and expansion of our flagship Ruth’s Chris Steak House brand,” Ruth’s CEO Michael O’Donnell said in a statement. “We are confident that Mitchell’s will complement Landry’s existing seafood restaurant portfolio.”

Executives for both Ruth’s and Landry’s were not available for comment. A spokeswoman for Ruth’s said the company had not announced efforts to sell the concept.

The sale adds another seafood concept to Houston-based Landry’s portfolio. Its brands include Landry’s Seafood, Bubba Gump Shrimp Co., The Oceanaire and McCormick & Schmick’s, among others. The company has made numerous acquisitions over the years, many of which were of struggling concepts that could be purchased for fairly low prices.

In early 2008, when Ruth’s acquired Mitchell’s, executives predicted that the fish market and three steakhouses would add $98 million a year to company revenue.

But a recession that began in 2008 interfered. In 2009, the first full year Ruth’s owned Mitchell’s, the segment provided just $75.5 million in revenue.

In recent years, Ruth’s has struggled to improve Mitchell’s Fish Market’s sales and profits, and there are signs this year that the concept’s struggles have worsened. Profit at Mitchell’s has fallen 8.6 percent from 2011 through 2013, even as annual sales during that time increased by nearly $2 million.

Revenue and same-store sales at the fish market fell 2.8 percent during the third quarter ended Sept. 28, and profit fell 8.7 percent. Traffic at Mitchell’s fell 6.2 percent during the quarter.

Same-store sales at Ruth’s Chris rose 4.8 percent during the third quarter, including a 3.3-percent increase in traffic. Ruth’s took a $15.3 million loss on an impairment charge on Mitchell’s during the third quarter.

In a recent earnings call, Ruth’s executives said the charge reflected current revenue and growth trends at Mitchell’s, as well as broader trends in the polished-casual restaurant market.

O’Donnell also suggested that Mitchell’s gets lost among large casual-dining chains with big ad budgets. “We actually think we’ve been relatively stable given the fact that we don’t have a big voice,” he said.

“Given trends over the past few years … it had become increasingly difficult to see the long-term growth path of Mitchell’s within” Ruth’s, wrote Jefferies analyst Andy Barish. “We believe this transaction makes sense and allows management to focus on growing the Ruth’s Chris brand.”

In selling Mitchell’s, Ruth’s becomes the latest company to sell a brand to concentrate on fewer concepts. In May, Darden Restaurants Inc. sold Red Lobster for $2.1 billion. And earlier this month, Bloomin’ Brands Inc. said it planned to sell its 28-unit Roy’s Restaurant concept.

Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze

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