Ruth’s Hospitality Group reported unaudited financial results for its fourth quarter and full year ended Dec. 28, 2014.
Net income from continuing operations was $8.9 million in the fourth quarter of 2014 compared to net income of $6 million in the fourth quarter of 2013.
On Jan. 21, 2015, the company completed the sale of its Mitchell’s Fish Market and Mitchell’s/Cameron’s Steakhouse restaurants and related assets to Landry’s, Inc. Consequently, operating results for the Mitchell’s Fish Market and Mitchell’s/Cameron’s Steakhouse restaurants, and the related impairment and loss on sale, are included in discontinued operations for all periods presented.
Total restaurant sales from continuing operations in the fourth quarter of 2014 increased 9.9 percent to $93.1 million compared to the prior year fourth quarter. company-owned comparable restaurant sales for increased 5 percent in the fourth quarter.
“I am pleased with our fourth quarter results and our 20th consecutive quarter of traffic growth,” says Michael P. O'Donnell, chairman, president and CEO of Ruth's Hospitality Group. “Our Ruth’s Chris Steak House team members, along with our franchisees, continue to execute at a superior level resulting in increasing sales and profits for our shareholders.”
Review of Fourth Quarter 2014 Operating Results
Total revenues from continuing operations in the fourth quarter of 2014 were $98.9 million compared to $87.6 million in the prior year fourth quarter. In the fourth quarter of 2013, the company changed method for recognizing gift card breakage revenue. The cumulative effect of the change was recorded in the fourth quarter of 2013 and reduced other operating income by $2.1 million.
Ruth’s Chris Steak House Sales
- 65 company-owned restaurants were open at the end of the fourth quarter of 2014 compared to 63 at the end of the prior year fourth quarter. Total operating weeks for the quarter increased to 836 from 793. Total operating weeks exclude discontinued operations.
- Average unit weekly sales were $112,200 in the fourth quarter of 2014, an increase of 4.5 percent compared to $107,300 in the fourth quarter of 2013.
- For the fourth quarter of 2014, company-owned comparable restaurant sales increased 5 percent, which consisted of a traffic increase of 2.5 percent along with an average check increase of 2.4 percent.
Franchise Income
- 77 franchisee-owned restaurants were open at the end of the fourth quarter of 2014 compared to 75 at the end of the prior year fourth quarter.
- Franchise income increased 4.7 percent to $4.4 million in the fourth quarter of 2014 from $4.2 million in the prior year fourth quarter, driven by a 3.2 percent increase in comparable franchise restaurant sales and new franchise unit development during the last 12 months.
Food and beverage costs, as a percentage of restaurant sales, increased 72 basis points in the fourth quarter to 31.8 percent. The increase was driven by higher beef, seafood, and dairy costs.
Development Update
During the fourth quarter of 2014, two new company-owned Ruth’s Chris Steak House restaurants opened, one in Gaithersburg, Maryland, and one in Marina del Rey, California.
Also during the fourth quarter of 2014, franchisees opened one new restaurant in Taipei, Taiwan, and relocated a restaurant in Alpharetta, Georgia, near Atlanta. The company has signed leases to open two restaurants in 2015, one in St. Petersburg, Florida, and the other in Dallas. Franchisees are projected to open four restaurants during 2015.
Review of Full Year 2014 Operating Results
Total revenues from continuing operations in 2014 increased 7.4 percent to $346.1 million compared to $322.4 million in the prior year. The increase in revenues from continuing operations was due to additional company and franchise restaurant development and an increase in comparable restaurant sales.
Ruth’s Chris Steak House Sales
- For the full year 2014, average unit volume at company-owned restaurants was $5.2 million. For the full year 2014, comparable restaurant sales increased 3.7 percent.
Franchise Income
- Franchise income for the full year increased 5 percent to $15.8 million in 2014 driven by an increase in comparable franchise restaurant sales and new franchised unit development. Comparable restaurant sales increased 3.4 percent for the year.
Food and beverage costs, as a percentage of restaurant sales, increased 103 basis points in 2014 to 31.7 percent, due to higher beef, seafood and dairy costs.
Financial Outlook
Based on current information, Ruth's Hospitality Group is announcing its full year 2015 outlook as follows:
- Cost of goods sold of 31.5 percent to 33.5 percent of restaurant sales
- Restaurant operating expenses of 47 percent to 49 percent of restaurant sales
- Marketing and advertising costs of 2.9 percent to 3.1 percent of total revenues
- General and administrative expenses of $25 million to $27 million
- Effective tax rate of 31 percent to 34 percent
- Capital expenditures of $20 million to $23 million
