Cheryl Henry expected the question. What would the next 90–100 days look like with her as CEO of Ruth’s Chris, a company led by Michael P. O’Donnell for the past decade? The answer: Not all that different.
“I think Mike stated we have our strategy,” she said during a conference call to recap the chain’s second-quarter results. “We have the team to implement it. And so my sole focus is making sure we do that.”
“I have expectations she is going to do a better job than I did,” O’Donnell added moments later.
It helps Henry, who officially transitioned from COO and president to CEO August 10, has already spent 11 years at Ruth’s Chris. She joined the company June 2007, and has been responsible for nearly every aspect of the company’s day-to-day field operations since. O’Donnell is shifting to an executive chairman role.
He appeared confident and excited for the move, saying, “I couldn't be more pleased for Cheryl. During the 11 years that she has spent here at Ruth's, she has managed every commercial aspect of our business and is eminently qualified to lead this organization.”
After finishing his opening remarks, he tacked on: “Madame CEO?” and turned the call over to Henry.
It also doesn’t hurt that Ruth’s Chris is motoring along with solid results. The brand’s company-run restaurants achieved same-store sales gains of 1.3 percent in Q2, consisting of a 0.1 percent decline in traffic and a 1.4 percent lift in average check. Franchised stores witnessed a 1.3 percent gain, year-over-year, including 3 percent domestically. Restaurant sales overall increased 10 percent to $103.5 million compared to $94.1 million in the prior-year period. Net income was $9.6 million, or 32 cents per diluted share, up from $7.8 million, or 25 cents per diluted share, in Q2 2017.
Ruth’s Chris ended the quarter with 77 company-owned stores compared to 70 this time a year ago. Two new units are scheduled to open in 2018—Jersey City, New Jersey; and Paramus, New Jersey. Two franchised units are also planned for 2018 (Fort Wayne, Indiana, which is already open; and Markham, Ontario, scheduled for Q4). Additionally, a casino location, the third for Ruth’s Chris, is set to open early 2019 in a partnership with El Dorado Resorts in Reno, Nevada.
O’Donnell said the brand’s “unrelenting focus on operational excellence” and commitment to the “Ruth’s Chris Steak House experience” has crafted a long-term strategy executives remain committed to protecting. One part of the process is the evolution of its 2.0 restaurant remodel, aimed at enhancing the guest experience and expanding Ruth’s Chris’ operating capabilities. The chain is on track to complete seven to nine remodels in 2018 and is investing 20–30 percent of its tax savings into the core of its business in the form of brand, sales driving, and people initiatives, O’Donnell said.
Henry added that she “cannot stress the importance of executing the brand experience.” It’s one of the differentiators lifting sales as promotional activity increases from competitors—something Ruth’s Chris saw, especially through June and July, this past quarter.
Special occasion business pushed comps positive in the quarter, Henry said. “We saw solid year-over-year sales growth on both Mother's Day and Father's Day as guests continue to choose Ruth's Chris when celebrating these special moments. We also experienced growth in our private dining and just-because segments,” she said.
Ruth’s Chris cashed in on lower beef prices following last summer’s record-high levels. Food and beverage costs as a percentage of restaurant sales decreased 180 basis points, year-over-year, to 28.1 percent. The figure was driven by a 10 percent decrease in total beef costs.