Del Frisco’s stock volatile after secondary offering

Del Frisco’s Restaurant Group Inc., which reported solid second-quarter performance on Tuesday, has bounced back from a slight dip in its stock price that came the same day its largest shareholder, Lone Star Funds, announced it would be selling 5 million shares.

Southlake, Texas-based Del Frisco’s, which went public last summer, saw its stock price dip by nearly 6 percent Tuesday, when it also reported a 22-percent increase in profit for the second quarter, which ended June 11.

But the parent of the Double Eagle Steakhouse, Sullivan’s and Del Frisco’s Grille chains saw its stock rebound by Thursday, when it closed at $22.64 a share. The shares were trading near $23 by Friday afternoon.

Proceeds of the secondary offering announced Tuesday will go to Lone Star Funds, the private equity firm that bought Del Frisco’s in 2006. When Del Frisco’s went public, Lone Star held about 18 million shares, and it sold 4.9 million shares earlier this spring.

Secondary offerings aren’t necessarily a negative signal, but rather a part of the private-equity process, said John A. Gordon, principal with Pacific Management Consulting Group.

“These offerings aren’t really a surprise,” said Gordon, noting that the investors typically will divest. “The backer has other liquidity requirements or is trying to book a profit while things are relatively good.”

He added, “Del Frisco’s did make it last quarter onto my restaurant standouts list.” He also noted that the good performance has extended to other upper-end steakhouse companies like Ruth’s Chris, Capital Grille and Fleming’s.

“Upper-end steakhouses have done very well because of the upper-end business travel recovery,” he said. “They have outperformed everyone.”

In announcing the secondary offering, Del Frisco’s said it will not receive any proceeds from the sale of those shares.

On Tuesday Del Frisco's Restaurant Group reported net income of $4.4 million, or 19 cents per share, for the second quarter, compared to $3.6 million, or 20 cents per share, in the year-earlier period. Revenue increased 19 percent to $60.4 million from $50.7 million a year earlier.

DFRG has 35 restaurants in 19 states and Washington, D.C. The company has 10 Double Eagle units, 19 Sullivan's and six Del Frisco's Grille locations.

Contact Ron Ruggless at [email protected].
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