RUTH - Earnings call transcript Q3 2017 | Ruths Hospitality Group Inc

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Ruth's Hospitality Group Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the formal remarks, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

conference recorded. today's reminder, a is being As I'd Mr. to turn over to the conference now like Vice of Taylor, Mark President Analysis. Financial Planning and Please sir. ahead, go

Mark Taylor

Thank good and you, morning Shannon, everyone.

Chief is on Chief Honolulu, from Operating President with as Haak, and here O'Donnell, call well us President Arne who me today Officer, Vice Park, Financial Joining Chairman calling are the Hawaii. Florida. and in and Chief Executive Executive in as Officer, is Henry, Michael Winter Officer, Cheryl

our remind SEC's of of you at that placed will as recent of undue financial to Web-site part performance our for copies filings Before well as of a future Web-site These to today we discussion like not upon operating begin, the therefore discussion for earnings that include SEC like sec.gov would more statements of refer our press I'd be and the and today's rhgi.com We detailed should with reliance are risks our you statements. Relations release them. Investor our forward-looking impact to not results. guarantees at section future could and the the

During this per calculated This well internal useful earnings excluding to call, performance. refer was believe as discontinued measurement as measure will certain items from operations. represents a adjusted by losses non-GAAP We share. this we that measure of

the like Mike turn share press CEO, release our to earnings over for Chairman in find I can per of call. would reconciliation You now adjusted a to O'Donnell. today's and call our

Michael P. O'Donnell

morning. all us this the joining on for Thanks, thank you Mark, and call

Harvey, and beef of with challenging the as impact third seen Maria, quarter As the as release, double-digit a Irma earnings well hurricanes both reflecting probably our you have of results inflation. one in our return was

$X.XX. accounted a high At I pleased $XX.X and quarter While significant level, challenges members and total our million Arne Comparable revenues back the in and earnings open to full restaurants in announce for and on were driven to capacity. X.X%, decreased significantly traffic all a quarter increased people, at created hurricanes and are a quantify are disappointing, to average this decrease that X.X% am further check. while sales safe by team restaurant the by a for X.X% restaurants will influenced decrease impact these and impact in his per share our in all These results, were and had the storms X.X% remarks. third

so driving More single-digit low the and to am are positive in to far report up quarter trends running I importantly, range. mid the sales, that are pleased fourth traffic are which for now

them respective partner, opportunity pleased a I six been Desert with the shareholders, restaurant above-average business to Their successful despite is our as an by results restaurant third learn proven our franchise sizzling external and to return group aloha success. any and each model not return that levels and focus Hawaiian capital forms brand's flow Honolulu hospitality, Fertel's growth us successful quarter a forward steaks of spirit our very led that team welcome to with to competitive the with we predicated the restaurant-level on development team's market. am for the Schoch, our our working his the I'm founder Today business, of invest to area Randy from award-winning presented do of admirably cash prime of recipe, includes on leadership our our and legendary Ruth acquisition announce one long-time This impressive invest core and these Restaurants, all LLCs am operational locations have Island reflect the team restaurants, strong franchisees. continue new [kauai] strategy began to and the While successful what that, success opened business, steady and his which This capital our of generated this is group have of grown great in and acquisition returning in Hawaiian Hawaiian continuing I this our and to Hawaii. to in includes including shareholders with This produce their excellence focus a with this as while tourist-driven environment. that restaurants. Hawaii. stores. in these each that their balance enables selectively, franchisee, built It long-term proud foundation restaurants, in of and combine excess operate is this sales has margins With leveraging rights our restaurants, our total the week, six all challenges. grow restaurants the excited well consistency XXXX their to Randy people of of just business, together under of acquire look restaurant business to opportunistic Randy [ph] market other's of we both our has in and in six as building collection footprint and from

We XX% by our than expect the Since million end third the Subsequent to return and doubling and we've our addition, and our organic our and our quarter this announced In the leader $X.XX remain our dividend. total our over the XXXX a to transaction earnings. $XX nearly category complemented while steakhouse soul million remodels. program, of in continue be positioned our to to of the returning a as XXXX, quarter, first our summary, to a repurchase The deliver in of revenues earnings. restaurants shareholders, on to dining growth strategy. and growing end to business fine invest Board close of accretive has both no later $XXX quarterly us, standing alongside us partners in who new heart franchise new share in

provide shareholders. value the on that, results. turn third to the strategy to over is execution With our more the We create I'll way detail the for that quarter believe to call continue successful this of to Arne best enduring

Arne G. Haak

Mike. Thank you,

For income or net in benefit $XXX,XXX share the the of share, or net quarter per income per third the September million diluted XXXX, non-recurring of XX, $X.XX million, we XXXX. quarter third income third compared during a settlement disputed included of to related charges. XXXX of Net $X.X quarter to ended reported diluted the $X.X $X.XX rent of

or X.X% and share, item an driven operations, this sales. Total restaurant a and net diluted $X.XX year the Company-owned from to sales of in the contribution diluted our $X.XX prior of or quarter increase discontinued $X.X third period. from million last year. new restaurants by the per Excluding loss for decrease were in XXXX $XX.X from $X.X share increase per the in comparable million, million, was was X.X% the offset compared million $XX.X quarter by third The restaurant income

and points impact a weakness as This on our created preparing storms, mentioned, restaurants, negatively XX evacuated earnings were share. of the over our basis behind significant Mike closures XX% in of quarter of of total well local $X.XX hurricanes on This As restaurant a by during to impacted as the the or sales out of were communities a XXX total to XX and for XXX Company-owned sales in $X.XX ahead XX of drag resulted per These quarter. impacted system. as storms days the impact.

sales Average been restaurants across quarter in franchise have Excluding flat our been year for in periods. up X.X% the period. in sales X.X% XXX the were consistent up and Company-owned Franchise the operating single-digits weekly the $X.X $XX,XXX XXXX. last our XXX, sales the sales income restaurants three Comparable X.X% international for Total in hurricanes, quarter down would year-over-year in million, year-over-year. was up third third domestic and third estimate restaurants quarter in restaurants from $XX,XXX were weeks quarter, were franchise of the have Company-owned X.X% X.X% were from quarter, cadence to of $X.X quarter the for franchise up were the the the comparable from second fairly impact in we restaurant sales would all up of during low comparable Total up million the X.X%. comparable ago year.

our also sales, X.X%. impacted hurricanes rates foreign Harvey, exchange X.X% international of Maria. were sales and was Irma currency sales franchise comparable franchise negatively comparable Excluding up the by total up were on impact The community and international

on locations. storm our franchisee has immaterial in was significant and franchise two royalties quarter, their Puerto damage Rico impact experienced restaurant through of the the permanently Although closed one

beef The food costs, third our to increase expect XX.X%. was of cuts in to for beef to for driven we are a of our have increase percentage prices be on and the and fourth particularly in sales in increased demand. driven the beverage strong quarter needs total turning costs XX.X% restaurant approximately eased in Prices retail X%. XX% of locked remainder full the the was on costs. points basis We up currently and year. was by the a now filet increased Now, quarter Prime year as by This costs year-over-year XXX increase

As in increase this fourth modest the quarter. inflation, a during expect a X% and added result the fourth we price a quarter, of increase carry have to roughly beef now

also of related in of benefit healthcare contributed settlement of of to sales third a as For XXXX related restaurant claims and variance. sales of the the the to increase deleveraging. operating our year-over-year XXX points basis as the storm quarter lapping restaurant impact charges due of rent the resulting quarter, well The timing to $XXX,XXX the the as percentage to inefficiencies primarily expenses was increased The XX.X%. disputed

Our driven decreased compensation. a to G&A X.X%. a expenses of to as total performance-based by costs advertising XX a increased revenues decrease primarily as revenues basis XX year-over-year of and total percentage basis in X.X%, points points Marketing percentage

the the of in in compared to expense third of Pre-opening were marketing As spent in mix dynamic, similar quarter. quarter, new we the and $XXX,XXX openings. line the in while be the driven second our to timing our quarter marketing costs $XXX,XXX, fourth expect the expected, restaurant third quarter to third XXXX, our was with remains amounts in by quarter that

suburban currently development Company-operated in opening of is front, occur the of December Colorado. the our the year Tech Center scheduled last On to Denver, in

we a location in for half of Jersey, the a new previously XXXX. announced, Jersey second we to As signed open lease in New City, Company-owned have which expect

aggressively on to sites continue and for XXXX. We XXXX additional late work both

the We these once will leases announce been signed. have

franchise new China, capital with of the our Chengdu, franchisee one million. restaurant in the XX over Sichuan opened the of a of population in On side development, province October

relocate XXXX. in Indianapolis our the partners quarter, our currently new a restaurant fourth Wayne, will Indiana Mississauga, the open in franchisee Fort and Canada expects location franchise to During in

$X.X third shares for of share. the repurchased Company per XXX,XXX common quarter, the During stock million, or $XX.XX also

the which As Mike million April mentioned new of program $XX in a $XX replaces the this of million announced the only facility, morning, outstanding we This XXXX, end $XX million up senior authorization. authorization million in new second share remaining. repurchase third also million had of had capacity we quarter. credit quarter, previous announced $XX At our end of from $X debt the under the

However, in we paid additional $XX million. debt since an balance point have our the fourth down at leaving this million to $X today quarter,

the like to for our metrics. I'd year key update our outlook for full some of of Now cost XXXX

We continue the restaurant of to our XX% to to XX% be expect sold range of in goods cost of sales.

expenses operating restaurant XX% expect of sales. restaurant between We XX% to remain and

to total expect costs revenues. continue X.X% to of advertising and X.X% marketing We to be

$XX expenses expect We between and million. G&A remain to $XX million

to effective rate now XX% capital and $XX expect We $XX We of expect continue between an be million. expenditures to tax million to XX%.

Lastly, fully XX shares, program. the under million between share we XX.X to of our exclusive outstanding repurchase be and any shares expect share now Company's repurchases diluted million

higher effect some a call preliminary for also to Hawaiian great give the the XXXX, Before acquisition revenues than In XXXX. the average experienced group system that roughly checks to our Hawaii, a call higher over in of like traffic we the that, business turn million tourist-driven $XX With the both has economy, with of These results on turn the mainland restaurants. of is menu are a than and in questions This, nearly current for might questions, in are over sales price any growth. now higher insight the group have. on I'd to average. RHGI. as and combined restaurants Due million five royalty produced doing restaurants. XX% To-date of cost to result $X.X in that the XXXX, in average our we I'd restaurants Shannon, those these like in sales

Operator

Andy from come will question first Our Jefferies. Instructions] of Barish [Operator

Andy Barish

Do we Hawaii? line kind the on peek puzzle? profile with in during in little the aloha. corporate Mike. you prices fun give since us morning, But always. maybe you calls, margin of margins early but last I know can menu of think or earnings been that piece the it's here, averages how it's a Good not there where a just higher ton early about I've are, the of bring do

Arne G. Haak

Andy, this is Arne. Go ahead, Mike.

Michael P. O'Donnell

in Thank and good and the be sales quite is. are line in margins the you. margins – with Company would where and Hawaii the Andy, AUVs in

Arne G. Haak

one I'd thing just add Andy, that. to

and as restaurant the unique two, what bit of maybe higher indexing G&A consistent then of go it And its fairly restaurants remote there little today spend brings the think, I given we a out a and the a of remoteness those on do you kind level. level, of kind the normally is down market, dynamics than profile because marketing in of unique of at nature. course even

there's not there of out probably leverage as get restaurant So level much G&A on as the margins. you

Andy Barish

that one maybe and I unit new got two that guys at or cause franchise are the in we trying pick stores right I know to as have but now? you guess things be Okay, the disciplined pipeline to that, been for maybe helpful. integration And we does you acquisition front, that and only as growth then are pipeline on Company XXXX up, Hawaii quite have on long looking

Arne G. Haak

Andy, Arne. this is

think look think your I was franchise I uninterrupted. for question There pipeline we no next our as year, with at planned. continues franchise I pipeline, guess so development franchise started

own at the and on there of Obviously, still that we we are we year are front XXXX our looking, As working on working still are are development, half but opportunities XXXX. we working. we integration, the still for are look

Operator

question from Piper next of Our will Joshua Long Jaffray. come

Joshua Long

of to the the Hawaii Excited hear layering about stories. in

these get Company needed the nature system G&A of investments layering of the the side? we things or where just are into into you on outside that needed kind the to there profile can point be layer support think kind actual curious of Given or overall what some other Arne, mentioned, store would acquisition investments I these to to the

Michael P. O'Donnell

Mike. is This

way Let uniqueness incredible about It's can an job, talk Randy Schoch. me business I as up, business has this tourist Hawaii the has I the here did this. set in that what think is Randy say, done, we of et think here. us resources, integrating human have interrupt to marketing, we some I intend additional personnel in successful who don't be for are order cetera, restaurants, involved these to already and in

learning expand other's into earlier as expand, think here we business. we that my lot of I do I things that enjoy As they from We in get this. learning of we that have result and a our actually a will success, we comments, do can parts tourism-wise said that we have each some of think to we can other

as a So, on the we we I'm further used this away that a way to fact in evidenced are to to we by support effectively at going need determines little is home to. a here are what move from in X have is it. than I call o'clock the mean, morning,

the we this, find as to restaurants. successful and and go through appropriate continue So, of these level will support we see that we'll G&A

Joshua Long

Understood. Thanks for that.

you terms that if out bit, where is locked On up color was and cost bit of terms us in or curious called I that there the could feel break how a maybe you inflation might or side, you're up tick more goods of in any little opportunity that a now give have you beef down that X%. XX% you good to little at have contracting? with cuts do by of being

Arne G. Haak

Josh. This again. Sure, Arne is

XX.X% being for So, inflation talked the That by the a actually really quarter of as X% We and being about over actually interesting quarter. was cut, being and XX%. it Prime we look into comprised fourth it's going the been third quarter. up cuts filets at down

double-digit now it lot we fourth was really for certainly, in on So, In and be modest there see we Prime inflation. the think business will trends on flattish the inflation quarter. tremendous many retail We but what inflation That's cuts. third a kind rib-eyes on rib-eyes are kind rib-eyes of and of right don't demand on expecting more quarter, we there the and the see bone-in we filets. of expecting the of I pressure put are

the filets talk we the about our about too, of highlight half when to lock-in, Just volume. represent

of volume of that under really we look We'll when filets, half to contract it. our continue about locked XX% right it's So, the at have now. is

at just it But the an how are being eye if we going. see of market we'll and opportunities, look think and them consider it's it on there and at comfortable well. as we are I course keep

Joshua Long

for the you repurchase of housekeeping prior that. authorization? shares kind remaining just to the of And repurchased on me, fall one then clarify Thank the authorization, a The recent Great. is under they everything more that? for that you repurchase quarter, share on during

Arne G. Haak

million $XX a authorization. repurchase have we fresh No, share

none been that yet. So, of has used

Joshua Long

Understood. Thank you.

Operator

next Brett Levy Bank. will of Our question Deutsche come from

Brett Levy

know, morning, Mike. to good you, morning I should Good address good I evening, how don't Florida.

Michael P. O'Donnell

good morning. It's early

Brett Levy

why is, are general? that been make refranchised these what confidence, in capital that right following do units, moves? and be Obviously, seeing this perfect the X.X, sense, is the we've makes quarter right needs what to is investment, the asking, given was to seeing just in But in think you first with opportunistic. significant question the on on gives now you two an Joshua any refranchising So, volatility And now are time you in to made other full there retail these that's then units? also,

Michael P. O'Donnell

let Hawaii not – buying are be we the we restaurants refranchising, in guess I clear. to are me

Brett Levy

yes. Sorry,

Sorry.

Michael P. O'Donnell

prices that morning. on think wouldn't We X and have the back is anomaly, number you o'clock control I of third to I X can't for complete if at call can't I I years. the can't go us a control, a be hurricanes. quarter control Look, certainly beef in

Hawaii I able and continue cash to produces that. adds only value have provide a these The the business shareholders. substantial been reinvest a in that great mean to opportunity acquire to that amount restaurants we solid to of So, very here six to we've

as of that notion something opportunity to these is add the outside not simply great, timing view. to and portfolio the is that really view problem to is we something externally the restaurants causing a Company's So, just the nothing us. this We

again, at the Can our of you this I an opportunity, you strength flow look accretive it! at and say and for am an look positive highly the I cash and sheet, strength If it about you our investment. you just more we how look think excited look excellent at presents about balance of any you it

Brett Levy

these great. recent there most all No, made to be will just are to level? capital And the sounds additional format store the be it in investments that need or

Michael P. O'Donnell

are remodel, that they is sure make of Waikiki – restaurants They amount Particularly various stages very that much we various of are acquisition in are there they in for have to and in our to Honolulu capital and great are that. in substantial do speed. accounted available to and up restaurants

Some we will have by But in reinvesting business. teams his back and in XXXX. fabulous of restaurants, done done and investment the have at fabulous has these large, maintaining Randy a a probably his restaurants outer-island some job, job

Brett Levy

early And let Arne, in Can you're you one on for looks you, hook. off get you what XXXX give any beef inflation? the us thinking terms of can't

Arne G. Haak

a good. if is Prime of This question remains pretty record beef that's far. know ball kind them. growing, that Brett, would and But locked at quarter running I the when of to very The crystal beef grading set look third looked take cuts have don't I at XX% expensive some we Prime don't at cattle of inflation supply demand back think this to continuous time overall think our had is still I on summer, that gone opportunities supply I we coming supply the related question, perspective, we highs. Josh's backdrop goes from saw the so or we the and I new a guess that for of the good. seemed broad

that's So good. very

about supply inflation that the I all question. think the side of gives confidence us

I who Prime a the side, what is just think this we quarter like where retailers decision a for it beef beef is On it. a the byproduct. to make long time haven't when showcased went through looks demand showcase

You can't make more Prime beef.

out. from so, can move move it. in and And away retailer we can't A move

demand the supply is through And to only outstripping solve way the is demand, price. so, if there increased

as were know seven And don't so, just promotions them here mean, retail watch long tracking been successful pause. they've higher than probably in prices Prime that I us as we've I my at rib-eye guess under beef. were gives in been how I last the the years.

I but the disruption mindful So, pretty retail demand, the feel about guess we we good supply of backdrop. of are

Operator

will Our come next of from James. Vaccaro Raymond Brian question

Brian Vaccaro

the former, just could concentrated know a broad if there That if customer curious improvement improved, on hurricanes? that from of big more would comps you segments? it's the that seeing sequentially I'm be I just mentioned in been different quarter-to-date or You areas regionally helpful. you you the seeing have pretty has and exposure sort recovering Florida. provide some are you to And have are what more perspective across of a

Michael P. O'Donnell

Brian. Sure,

story. positive. come it's the are just we it's that pleased All more to have a seems think regions to pretty broad-based. I Florida Florida say but back, than are recovery running

geographic So whether at And it restaurant, the like as within it's are a running dining, up a look well. segments at on we private too look we center when or it revenue those basis. from mix all a-la-carte dining

a tough So, are back it it after we come to and glad quarter. with third see pleased

Brian Vaccaro

Yes, right, you. thank all

the And Arne, quarter you if price mix? the can I just versus missed comps, it, sorry aggregate third

Arne G. Haak

had decrease Sure. check a significant of I We we had was check. mix. are some average and X.X in actually point we increase about X.X% believe the fairly negative

Happy we a price. and items. place have seeing is we on the growing do seeing that's the tell the the negative menu you, to revenue check shift then quarter sales, center, we summer broadly, seeing seeing, in with hurricanes the in the as mix lot Sizzle Swizzle menu speak Swirl and has we items, far The we so to a matching are of menu of are had the but I that guess the in of if business around menu refresh Hour did are what mix I we're So, this restaurant I bit terms would fourth bar of one well. in little

change. very being going change And so we mix and mix some and are is there, it's that there are driven but by with so on growing happy overall sales traffic,

Brian Vaccaro

Okay.

what phone was my said for third sorry, the out quarter. cut you And mix when

that. about Sorry

Arne G. Haak

Sure.

check about about of was price quarter had the down we third our and in had we negative of So, so X.X%. X.X%, mix X.X%

Brian Vaccaro

Certainly.

you. Okay, thank

the On you up basket? see rest the year. side, costs you seeing are color you some for beef the Can provide food the of X% on said what you that in

Arne G. Haak

the there little basket, think some the of I always a on I – but rest is is So, of think bit and from puts pressure there takes, seafood. aside

think us I pieces of of the price. the manage overall are within parts it's in bounds can to of is There other terms moving in terms of what no big concern or we that restaurant level margin.

Brian Vaccaro

fairly in And around beef of from range wide COGS it guidance, heard so, you a like sort I quarter. embedded what inflation your fourth and X% the annual sounds expect in

of You I or annual little arrived am said I something and for more Does the you sound sort missing the center took reasonable of year. guidance pricing, dead there? at that COGS a your

Arne G. Haak

it you're at the guidance think like dead I It center sounds point. the reasonable. of sounds

Brian Vaccaro

Fair a the obviously, guess balance enough. are funding while also all you is know new I the an cash And and into repo? of sustaining little then comfortable and on ongoing balance free of with have and transaction. that revolver you higher repurchase flow the level sustaining the a authorization wanted I strong the Hawaii drawing sheet share ask message there acquisition, I about profile, to

Arne G. Haak

Sure, Brian.

We million we have revolver a accordion. a have and million $XX $XX

leverage if to pursue the good to capacity, us balance we to So if opportunities. need go have think for investment take sheet those additional opportunities are we on use and there ability we our

through debt on it transaction. are this financing our I debt on the level with We plan comfortable very we think credit with of line.

other or that inhibits it level very of all. are debt whether We it's at we with dividend, at don't development and or things, looking us from comfortable share repurchase think

is a think, healthy time we have we cash flexibility less you I that holidays why through even certainly certainly get up, the credit the strong, looking this our you all we this Mike that if sheet, are in leverage. this is flow said, and probably produces, Xx the the and at than keep as balance by line, add why

and with kind go sleep that sleep can think And well of so, I sheet. to we balance very all

Brian Vaccaro

then And transaction? EPS the expect one, okay. can you Yes, just last quantify accretion the annual from you

Arne G. Haak

you We are in not any give prepared yet of to it. terms guidance

gave you kind I come think data you range. kind what up of terms in a work as through points you of lot the of between I franchise margins, sales with think we and a can it of pretty royalties, good contributed

I time. done you, a the one on of in of really quarter. think was of a I mean fairly highlights due of lot short have We the will amount tell has that diligence I team worked hard this. this

As get meaningful we understand we'll other today, the integration there is we what with January. you work in on update to told certainly each from and subtleties, you change a if

Brian Vaccaro

enough. Investor And I All right, the on fair Hawaii, then in my Day when can calendar? that put

Arne G. Haak

Mike I'm one No, just kidding. now. is having

Michael P. O'Donnell

the minutes, now. it Yes, can if you you right next in can have get here XX

Brian Vaccaro

Fantastic. thanks All right, guys.

Operator

question we'll Jefferies. take And a follow-up from Andy of Barish

Andy Barish

little if this too are of just on Wondering sort as was on is stuff. out at as Might quarter, of on. or going stuff of and recent something know a but question compare, that flattening just the secondly wondering if going the negative, last the next evolution the granular, quarters some of And you I mean I'm of Ruth's kind dug or looking beg more in average there noise presidential current kind there into weird quarter, I Chris but does where the October trends on be as looking the evenings X.X some then whiteboard? of on there debates well year's check those

Michael P. O'Donnell

her 'oh well and about big did about is X.X, any I'll some X.X, on X.X, where where day, the of came debate think but come a is that. singular she a from'. as is here on how that really a and that holidays, shift feels with little jumping bit it's There noise there working I of over it not a means Jewish X.X. going wow, us Andy, talk me check little we're to what bit the well, the Cheryl let So as as Cheryl turn let out at

Cheryl Henry

for I continued at, and think, design. that and process around us, and might what's around plan, continued the restaurants our of kind in the on the Andy, ongoing initial menu work next and went design, the we of okay, looking the from rollout that work an everywhere after We service that's look. how floor potential continuously so to

So, come. to more

Operator

further appear or time. any this questions closing I'll does conference O'Donnell no back have It we Mr. at over for turn to the remarks. additional

Michael P. O'Donnell

joining on eat and a for and you. and as steak it's all you Hawaii. great U.S. always, us out Thank across today, day in the go call to here the Thank

Operator

conclude for your you teleconference. participation. that today's does And Thank all

Ruths Hospitality (RUTH) 3 Nov 172017 Q3 Earnings call transcript