One of the leading upscale dining operators, Ruth's
Hospitality Group Inc . ( RUTH ), posted
first-quarter 2013 earnings of 25 cents per share, beating the
Zacks Consensus Estimate of 20 cents by 25% and comparable year-ago
quarter's earnings by 66.7%. A higher top-line and margin expansion
pushed up the earnings during the quarter.
Quarterly revenues climbed 7% year over year to $107.4 million
and surpassed the Zacks Consensus Estimate of $106 million by
nearly 1%. The company's higher comparable restaurant sales (comps)
growth, improved restaurant sales and increased franchise income
drove the top-line during the quarter.
Behind the Headlines Numbers
Company-owned restaurant sales climbed 6.5% year over year to
$110.5 million with traffic growth and higher comps gain at all of
Ruth's Hospitality's restaurant concepts.
During the quarter, comps at Ruth's Chris Steak House grew 6.6%,
driven by a 2.9% rise in entrées and a 3.6% increase in average
guest check. Ruth's Hospitality also gained from the time shift of
Easter that was not included in the year-ago quarter. Moreover,
comps at Mitchell's Fish Market crept up 1.5%, benefiting from a
2.7% and a 1.2% rise in traffic and average guest check,
During the quarter, franchise income jumped 6.0% to $3.7
million, gaining from a rise in sales volumes.
The company's operating margin expanded 230 basis points (bps)
to 12.2% in the reported quarter, driven by top-line growth, better
pricing and cost controlling initiatives.
During the quarter, restaurant operating expenses as a
percentage of restaurant sales, dropped 72 bps year over year to
48.1%, attributable to minimized occupancy costs. Food and beverage
costs as a percentage of restaurant sales were down 81 bps to 31.2%
owing to improved pricing, offset by higher commodity costs.
During the quarter, the company launched a Ruth's Chris Steak
House restaurant while shutting down a company-owned unit.
Share Repurchase & Dividend
Ruth's Hospitality has also authorized a share repurchase
program worth $30 million. Additionally, the company has decided to
pay a quarterly dividend of 4 cents per share on May 30, 2013 to
shareholders of record as of the close of business on May 16,
Heathrow, Fla.-based, Ruth's Hospitality has reiterated its full
year 2013 outlook. Restaurant operating expenses, as percentage of
restaurant sales, will be within 50.0% and 51.0% and general and
administrative expenses will range from $27 million to $28
In 2013, the company is expected to introduce a company-owned
restaurant in Denver, Colo. and nearly two to three franchise-owned
units. It is also likely to move its Houston, Texas unit in
Despite a tough consumer environment, Ruth's Hospitality's
ability to continuously register solid comparable sales is
impressive. Ruth's Hospitality continues to experience higher sales
volume and earnings growth on the back of its various sales-driven
initiatives. However, food cost pressure and wary consumer spending
remain headwinds. Beef costs, to which the company is most exposed
to, are expected to remain high in 2013.
Ruth's Hospitality currently retains a Zacks Rank #2 (Buy).
Some other restaurateurs like McDonald's Corp.
( MCD ) missed our
estimates on both lines this season while Yum! Brands
Inc. ( YUM
) beat earnings but missed out on revenues. Another restaurant
chain, The Cheesecake Factory Inc. ( CAKE ) was ahead of
the estimates on both counts.CHEESECAKE FACT (CAKE): Free Stock Analysis
ReportMCDONALDS CORP (MCD): Free Stock Analysis
ReportRUTHS HOSPITLTY (RUTH): Free Stock Analysis
ReportYUM! BRANDS INC (YUM): Free Stock Analysis
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