Ruth's Chris Maintains its COVID Momentum

Excluding some struggling markets, comps rose nearly 15 percent in Q3 compared to 2019.

November 1, 2021 Suzanne Blake

The past few months have shown Ruth’s Chris Steak House is more than capable of a COVID comeback.

Same-store sales grew around 8 percent in the third quarter compared to 2019, after lifting 5 percent in the second quarter. The increase factors in Boston, Hawaii, and Manhattan—markets where consumer behavior is still struggling to recover. Excluding those areas, same-store sales were up around 15 percent over two years ago. CEO Cheryl Henry is hopeful to see Hawaii rebound in the next quarter and new year as the state welcomes tourists in again.

“Our third-quarter results demonstrated our team's continued operational excellence in a challenging and dynamic environment,” Henry said during the brand’s Q3 earnings call. “Our performance also reminds us of how sought-after the Ruth's Chris brand experience is and how our guests trust our commitment to safety, quality, and a genuine hospitality that our team members and franchise partners have delivered for more than 56 years.”

Total revenues for Q3 were $104.2 million, up from $103 million in 2019. Restaurants averaged $103,000 per week versus $93,000 in 2019, which equates to a $5.4 million annualized AUV. Additionally, margins improved by 80 basis points compared to two years ago even though Ruth’s experienced market inflation of around 29 percent due to increases in beef, crab, and lobster.

“At the core of this success is our team members and franchise partners,” Henry said. “We have remained resilient and committed to excellence. They have provided an amazing and consistent guest experience, which is the core of what Ruth's Chris must do every day.”

The sales growth is continuing. So far in Q4, same-store sales are 11 percent above 2019, excluding the six stores in the three long-suffering markets.

However, companywide, there are still areas for recovery.

To meet inflationary demands of the current environment, Ruth’s has had to make some concessions when it comes to price. Historically, the company increased prices by 1 to 3 percent. But this year’s pricing to date has jumped more than 4 percent. And since beef prices are still at high levels, Ruth’s will be increasing prices again, this time by 1.3 percent in November.

“We are thoughtful and surgical with these price increases to ensure we balance profitability with the value we've been known for in the fine-dining category, and we will continue to approach pricing with this lens,” said CFO Kristy Chipman.

Henry said Ruth’s has to think long-term, not just short-term, when it comes to pricing since it has 56 years’ worth of protecting its guest experience and value proposition.

“We've taken price to the degree that we can, but make no mistake, we will not jeopardize our long-term brand position for short-term quarterly gain,” Henry said.

Aside from pricing, private dining has not returned to historical numbers. Ruth’s has seen an increase in holiday season events and it's working to convert those to booked events.

Business bookings have been growing over the past few weeks, Henry said, but it’s a bit early to say where the trends are headed, as the Delta implications will be revealed closer to the holidays.

“Despite near-term external pressures and uncertainties, we are committed to investing in the long-term health of the business,” the CEO said.

Part of that is ensuring guests are welcomed into Ruth’s “world-class hospitality and safety,” she said, and that means hiring exceptional team members and investing in the resources to train them.

It’s a hard game during a labor shortage, but it’s one Henry believes the brand can play well. Ruth’s started placing one additional manager in higher-volume restaurants this quarter, and expects to add one manager on average to most restaurants next year. In some cases, the company will promote from within if employees are well-equipped. Otherwise, the chain is looking externally for talent.

Ruth's Chris Steak House

By the end of the year, the company expects to improve labor as a percentage of sales by around 300 basis points compared to the full year of 2019. As the holiday season nears, Ruth’s is being strategic in putting additional initiatives in place to ensure staffing levels will be where they need to be.

“I'm not going to say it's easy and that's not more work and takes more attention from the management team as it does, but we feel confident that we will have the right team in the building,” Henry said.

Currently staffing levels are at 90 percent, a number the brand is satisfied with even if there do remain issues in the back of the house at some stores.

“We're happy with that because we did make the efficiency changes within the restaurant and eliminated the need for some positions, so we haven't seen some of the staffing shortages overall,” Henry said.

Another part of Ruth's investment in the future lies in growing its restaurant base. The chain opened a new restaurant in Short Hills, New Jersey in September, bringing in sales that outperform the system average. And that’s just the beginning of Ruth’s expansion. A new restaurant will open in Lake Grove, New York, before the end of the year, and the brand is on track to launch five new restaurants in 2022.

“You simply can't deliver solid long-term financial performance without unit growth, greater efficiency, and attention to detail within our four walls,” Henry said.

The company is also investing in technology. That includes enhancing the guest experience, reducing friction in the restaurant, and driving greater operational efficiency.

In Q3, Ruth’s made progress on implementing a POS and labor management system, with a full rollout expected in early 2022. The labor management centers around staffing busier days more effectively and takes into consideration no shows while ensuring Ruth’s can still accept walk-ins and prevent empty tables. The brand is also mining through data and testing ways to automate the restaurants.

“The intent is to better understand why our guests visit Ruth, and make sure each visit is further personalized by our staff,” Henry said.

The company has transitioned, like so many others, to adjust to rapidly changing consumers with their different demands sparked by a worldwide pandemic and technological evolution.

“Our whole focus has been, at least for the last year, to meet the guests where they are,” Henry said. “If they want Ruth's anywhere, if it's a private dining event, if it's outside in a tent, if it's all hard dining, bar dining, make sure that wherever the guest wants to be, we can accommodate it. We've seen them move within.”