Ruth's Hospitality Beats by a Penny - Analyst Blog
February 13 2012 - 4:15AM
Zacks
One of the leading upscale dining
operators, Ruth’s Hospitality Group Inc. (RUTH)
reported fourth quarter 2011 adjusted earnings of 11 cents,
surpassing the Zacks Consensus Estimate by a penny as well as the
prior-year quarter earnings by a couple of cents. The
better-than-expected results were driven by higher traffic and
comps growth.
Total revenue enhanced 7.1% year
over year to $99.6 million. Company-owned restaurant sales climbed
6.8% to $95.4 million, while franchise income jumped 13.4% to $3.6
million.
In full year 2011, the company
reported earnings from continuing operation of 38 cents per share
versus 36 cents per share in the prior year. Total revenue leaped
4.7% to $369.6 million.
Quarter
Performance
During the quarter, comparable
restaurant sales at Ruth’s Chris Steak House grew 7.7%, implying
the seventh consecutive quarter of comparable sales growth, driven
by a 6.1% rise in entrées and a 1.5% upside in average guest check.
The company also witnessed the eighth consecutive quarter of
traffic growth for Ruth’s Chris brand.
Moreover, comparable restaurant
sales at Mitchell’s Fish Market turn around during the quarter.
Comps crept up 0.4%, benefiting from a 1.4% rise in average guest
check, partially offset by a 0.9% decline in entrées. Same-store
sales at franchise-owned restaurant increased 8.0%, on the back of
a 7.8% and 0.2% rise in both entrée and an average check,
respectively.
During the quarter, restaurant
operating expense as a percentage of restaurant sales, increased 10
basis points (bps) year over year to 50.9%, attributable to
increased health insurance costs. Food and beverage costs
expanded 110 bps to 31.6% owing to unfavorable beef costs.
General and administrative expenses
stood at $5.8 million as against $6.5 million in the year-ago
quarter. Operating margin contracted 270 bps year over year to 3.7%
in the reported quarter.
During the quarter, the company
opened a franchised unit in Asheville, North Carolina.
Financial
Position
At the end of 2011, the company had
cash and cash equivalents of $5.0 million and shareholders’ equity
of $80.4 million. Long-term debt outstanding at the end of 2011 was
$51.0 million, up from $22.0 million in the year-ago quarter.
Outlook
Heathrow, Florida-based, Ruth’s
provided its fiscal 2012 outlook. The company expects cost of goods
to be 31.0%–32.0% of restaurant sales and marketing and advertising
expense to be 3.0% to 3.5% of the total revenue. Capital
expenditure for the same period is expected in the range of $10
million to $12 million and diluted share outstanding between 43.3
million and 44.0 million.
Our Take
The company’s continues to
experience higher sales volume and also remain encouraged by
Mitchell’s same-store sales that rebounded during the reported
quarter.
However, we remain cautious on the
stock based on cost inflation, lower consumer spending and intense
competition from peers like Brinker International
inc. (EAT) and Red Robin Gourmet Burgers
Inc. (RRGB) with respect to price, service, location and
concept in order to drive traffic.
The estimates have not budged in
the last 30 days, implying that the analysts do no see any
near-term catalysts. The Zacks Consensus Estimates for 2012 are
pegged at 43 cents per share.
BRINKER INTL (EAT): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
RUTHS HOSPITLTY (RUTH): Free Stock Analysis Report
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