Ruth’s Chris Steak House has spent 55 years looking to gain market share, CEO Cheryl Henry said.
The desire is to always remain relevant with guests. That’s the motivation behind expanding offerings and launching the company’s off-premises-based Ruth’s Anywhere program pre-COVID.
The post-pandemic future, whenever that may be, will be as a good time as any to pursue more market share, especially with thousands of restaurants falling by the wayside. But Henry said it’s too early to quantify just how much Ruth’s can gain.
During the pandemic, she’s traveled up and down the East Coast to understand what’s happening in different regions. She’s seen restaurants reopen after being closed for six months because of capacity restraints. There’s also the fact independents and smaller chains are likely to gain $28.6 billion in direct aid through the federal government’s upcoming COVID package. In other words, the final chapters are yet to be written.
What she can quantify is the fact 63 stores with open dining rooms are seeing same-store sales decline 16.3 percent in 2021—the chain’s best sustained performance in open dining rooms since it first reopened last year after the major shutdown. That’s an improvement from a 24.4 percent decrease in Q4.
“2020 was truly a challenging year for our Ruth’s Chris team and our franchisees,” Henry said during the chain’s Q4 earnings call. “We managed through two significant shutdowns during the year, the first in late March and the other most recently during our fourth quarter. Despite these challenges, our amazing team, both in the field and in the home office and our franchise partners, continuously displayed resilience and agility in the face of uncertainty, resulting in strong fourth quarter results.
Henry noted consumer demand is more about regional nuances and consumer mindset. For example, in the brand’s home base of Florida, restaurants with open dining rooms are sliding only 11 percent through the first nine weeks of 2021. In California, where outdoor seating and off-premises is available, same-store sales are still more than 40 percent down compared to last February.
Even though Florida has allowed 100 percent dining capacity for several months, Ruth’s has remained at 50 percent, a decision that Henry believes is “driving trust and frequency in that guest base.” Ruth’s will continue to monitor the capacity situation as more people become vaccinated and feel safer going out.
“I do think as more states start to loosen up capacity restrictions, we’ll make incremental changes along the way, but we haven’t set that yet,” Henry said. “Because of health and safety, we kind of let the guests lead to some extent, and then obviously, looking at the business and understanding what we need to do going forward. But right now, given the two incremental sales available when you add two or three tables, it’s a balance. And so we’re still conducting that balance, and so there’ll be more to come on that.”
Henry said sales are mostly driven by special occasions and “just because” diners. Ruth’s is still seeing business guests inside restaurants, but not as significant as it was pre-COVID. These particular consumers are local business clientele, which Henry identified as the first wave.
She said the second wave will be the business traveler.
“We think that would be later on in the recovery,” Henry said. “But we still believe that there’s going to be a demand across our buckets of business, if you will, that can help offset some of the still negative trends.”
At the end of Q4, 70 of Ruth’s 77 company-run stores were open. Comps decreased 26.1 percent in October, but plummeted to 35.2 percent and 53.9 percent in November and December, respectively. Overall, Q4 same-store sales dropped 39.7 percent, including a 34.7 decrease in traffic, as measured by entrees, and a 7.6 percent slide in average check, primarily driven by a lower off-premises check.
However, loosening restrictions in the new year have aided the restaurant’s recovery. Same-store sales slipped 38.9 percent in January and 25.6 percent in February, and now 75 stores are currently open.
Franchisees fared better in Q4. Sixty-seven of 72 franchises were open by the end of the quarter, including 60 stores offering indoor dining, two allowing outdoor seating, and five operating an off-premises only model.
The company expects to return to growth later in 2021. A store in Short Hills, New Jersey, will open in early Q3 and another location in Aventura, Florida, will begin construction in 2021 with an expected opening date in Q2 2022.
In 2020, total revenue decreased 40.7 percent to $277.7 million, compared to $468 million in 2019. Net loss in 2020 was $25.3 million, or 80 cents per diluted share, compared to net income of $42.2 million, or $1.44 per diluted share, in 2019. Comp sales lowered 40.2 percent year-over-year, including a 36.1 percent slide in traffic and a 6.4 percent decrease in average check.