Continued same-store sales increases at its Double Eagle Steakhouse and Sullivan’s brands helped the newly public Del Frisco’s Restaurant Group post a three-fold increase in profit in the second quarter.
In its first earnings report since going public in late July, the Southlake, Texas-based steak house operator on Tuesday reported net income in the June 12-ended second quarter of $3.6 million, or 20 cents per share, compared with $1 million, or 6 cents per share, in the prior-year quarter. Revenues increased 17.9 percent to $51.3 million, from $43.5 million in the second quarter of 2011.
Same-store restaurant sales increased 4 percent, including 7.3 percent at Del Frisco's and 0.3 percent at Sullivan’s, compared with a blended same-store sales increase of 12.3 percent in the second quarter of last year.
Mark S. Mednansky, DFRG’s chief executive, said on a conference call with analysts that the company’s three brands “target a much broader customer base than that of fine dining,” adding that DFRG has seven markets where it operates multiple concepts. He said the company plans to open three to five restaurants annually, with the newer Del Frisco’s Grille concept “serving as the primary driver” of unit growth.
The company this year has opened Del Frisco’s Grilles in the District of Columbia and Phoenix, Ariz. Another is planned in Atlanta, and a Double Eagle Steak House is scheduled to open in Chicago. “Each of the Grilles continues to perform at or above our expectations,” said Thomas J. Pennison Jr., DFRG’s chief financial officer.
Pennison added that the recent initial public offering of 5.8 million shares at $13 each produced proceeds of $70.1 million, with $61 million going to repay lenders and $3 million to former private-equity parent Lone Star Fund.
Del Frisco’s Restaurant Group is also looking toward putting more marketing efforts toward the corporate entertaining business.
“We’re also committed to amping up our private-dining sales,” Mednansky said, “which currently represent only about 14 percent of our total sales.” The company has hired a full-time corporate salesperson to spearhead that business, he said, which produces higher check averages and higher margins compared to typical dining-room business.
Private dining shows greater returns in the second and third years that restaurant units are open, he added.
For the full fiscal 2012, Del Frisco’s expects a 3-percent to 4-percent increase in same-store sales.
Pennison said the Del Frisco’s Double Eagle has the most exposure to beef price increases. “Right now, we’ve already modeled into our outlook to deal with lower double-digit increases in our commodities,” he said, adding that the company was able to deal with 2010-2011 beef price increases with mix and pricing.
As of June 12, DFRG owned and operated 32 restaurants in 18 states, including nine Del Frisco's Double Eagle locations, 20 Sullivan's restaurants, and three Del Frisco's Grilles. The company closed a Sullivan’s unit in the Dallas market on June 30 and sold the property, DFRG said in a statement.