Ruth’s Hospitality Group Inc.’s profit rose 11.7 percent in the fourth quarter, excluding one-time charges, despite higher food and labor costs, the Winter Park, Fla.-based steakhouse operator said Friday.
“We’ve had some external challenges, from difficult weather in the first quarter to the continued inflationary environment,” CEO Michael O’Donnell said during company’s earnings call Friday morning. “Even with those headwinds, our steadfast focus on improving the strength and consistency of the brand experience along with the hard work of our people allowed us to deliver another year of strong operating results and earnings growth.”
During the quarter, the company completed its sale of the Mitchell’s Fish Market brand, and is now concentrating all of its efforts and capital spending on its Ruth’s Chris Steak House brand.
The company has recently completed a comprehensive evaluation of its restaurants and is beginning a multiyear effort to remodel existing locations, executives said during the call.
Ruth’s will remodel 15 locations a year, and will apply lessons learned from the success of new restaurants and to existing locations to add capacity and improve kitchen efficiency, executives said. The remodels this year should cost a total of $6 million to $10 million.
“Instead of deploying (the capital) at Mitchell’s, we’re putting it into Ruth’s Chris restaurants,” said Arne Haak, Ruth’s chief financial officer. He said the company would examine the returns it receives on the remodels and tweak the designs as it goes.
In addition to the remodels, Ruth’s executives said the company will expand into smaller markets in coming years. Ruth’s plans to add three to five new corporate restaurants a year. About half of the new units in the future will be in smaller markets.
Ruth’s reported a same-store sales increase of 5 percent in the fourth quarter ended Dec. 28, split evenly between higher traffic and higher check. It was the 142-unit concept’s 20th consecutive quarter of traffic growth.
Sales growth was also in addition to 5.5-percent same-store sales growth in the fourth quarter of 2013, a two-year sales increase of 10.8 percent.
Ruth’s said revenue rose 12.9 percent in the fourth quarter, to $98.9 million, from $87.6 million the same period a year ago. Food and beverage costs rose 72 basis points in the fourth quarter, to 31.8 percent of revenue. The company attributed an increase in costs to higher beef and dairy prices.
Restaurant operating expenses as a percentage of sales increased 36 basis points due to rising labor and benefit costs.
For the full year, revenue rose 7.4 percent, to $346.1 million, from $322.4 million in 2013. Net income fell 26.8 percent, however, to $16.5 million, or 47 cents per share, from $22.5 million, or 65 cents per share. Same-store sales for the full year rose 3.7 percent.
The results included a $15.3 million charge related to the sale of Mitchell’s Fish Market, as well as other one-time charges. Excluding those costs, net income per share for the year rose 10.4 percent, to 74 cents per share, from 67 cents per share.
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