Ruth's Q2 Earnings, Rev Beat Again - Analyst Blog
August 08 2013 - 11:00AM
Zacks
One of the leading upscale dining
operators, Ruth’s Hospitality Group Inc.’s (RUTH)
second-quarter 2013 earnings of 20 cents per share beat both the
Zacks Consensus Estimate and comparable year-ago quarter’s earnings
of 17 cents by 17.6%. Earnings in the quarter received a boost from
the company’s higher top line and margin expansion.
Quarterly revenues increased 4.8%
year over year to $101.8 million and surpassed the Zacks Consensus
Estimate of $101 million by nearly 0.8%. Higher restaurant sales
and increased franchise income drove the top-line during the
quarter.
Behind the Headlines
Numbers
Company-owned restaurant
sales climbed 4.3% year over year to $95.1 million, led by
a 4.3% rise in average weekly sales, increased traffic growth and
higher comps gain at Ruth’s Chris Steak House restaurants.
During the quarter, comps at
Ruth’s Chris Steak House grew 4.6%, driven by a
2.1% rise in entrées and a 2.5% increase in average guest check.
However, comps in the quarter were slightly affected by the time
shift of Easter to the first quarter. Moreover, comps at
Mitchell’s Fish Market were down 1.4%, due to a
2.8% decline in traffic, offset by a 1.5% rise in average guest
check.
During the quarter,
franchise income jumped 12.5% to $3.6 million,
gaining from 3.6% and 3.2% rise in domestic and international
comps, respectively, at franchised restaurants and higher unit
expansion.
The company’s operating margin
expanded 150 basis points (bps) to 10.7% in the reported quarter,
driven by top-line growth, lower food cost and better menu
pricing.
During the quarter, restaurant
operating expenses as a percentage of restaurant sales was 50.3%,
down 74 bps year over year, attributable to minimized occupancy
costs. Food and beverage costs as a percentage of restaurant sales
also declined 180 bps to 30.4% benefiting from the reduction in the
beef costs and 2% improvement in menu pricing.
Store Update
At the end of the quarter, Ruth’s
Hospitality operates nearly 150 company-owned and franchised
restaurants worldwide.
Outlook
Heathrow, Fla.-based, Ruth’s
Hospitality has revised its full year 2013 outlook. The company now
expects its cost of goods sold, as a percentage of restaurant sales
within 31.5%–32.5%, down from the previous estimate of 32.5%–33.5%.
Restaurant operating expenses, as percentage of restaurant sales,
will continue to be within 50.0%–51.0%.
Our Take
With the help of its sales-building
initiatives, continued margin expansion and growing franchise
businesses, Ruth’s Hospitality has succeeded in posting solid
earnings and revenue growth in the past three quarters. The Zacks
Rank #2 (Buy) company is also focusing more on expanding its Ruth’s
Chris Steak brand, as it continues to perform well. Moreover,
moderating beef cost positively impacted the margin, going
ahead.
Some other players in the
restaurant industry which is expected to perform well, going ahead,
include Burger King Worldwide, Inc. (BKW),
Buffalo Wild Wings Inc. (BWLD) and Cracker
Barrel Old Country Store, Inc. (CBRL). All these companies
carry a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis Report
BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
RUTHS HOSPITLTY (RUTH): Free Stock Analysis Report
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