RUTH - Earnings call transcript Q4 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 Fourth Quarter 2017 Earnings Conference Call. [Operator Instructions].

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

Mark Taylor

and everyone. Sergio, good you, morning, Thank

Joining President Arne and the call Haak, Cheryl Henry, today are Officer. Chief Financial Vice and me President on Executive Chief Operating Officer; and

off per scheduled Cheryl absent that notice call call Mike at last the desire his Michael still and is to will the recovering knee You'll morning, from be he surgery replacement today. is doctor's on O'Donnell us this that, the morning. despite lead orders. sincere With week, had for call home this

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

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

for press the find earnings call. a call our Cheryl share release would today's to Henry. can now You reconciliation adjusted to over of I in like turn per

Cheryl Henry

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

and return growth. included to fourth report to comparable quarter are We which results, a both sales traffic restaurant positive pleased

from X.X% in Comparable XX-week a outstanding associated team did sales and an comparable a the in the results. in X.X% in these quarter average quarter to basis, of increase members, our hurricanes on restaurant driven restaurant X.X% a increase job We third traffic are the challenges the increased proud check. deliver with who recovering by

value. showed our These occasion and restaurant continued to to capped along sales growth. consistency of yet us of operational year-over-year Ruth's with of shareholders. and business, this well perform shareholder capital in fourth balance Thanksgiving, acquisitions components It in strong growth restaurant holidays, to business year flexible unrelenting special particularly team's as results comparable return Christmas to total and focus for growth on the of strategy full Our of all Group. were New create Year in returning This testament our comparable our the XXXX consecutive disciplined This our achieved result sales of consistency eighth to a year core approach restaurant Hospitality is consists a results, executed direct our sheet brand growth. strategy investments strength our quarter. increase that X% and marks is of and another The into we our our investing long-term excellence. All enables execute X this of

family these that of level the in and in strong restaurants evident produce culture franchise sales embody each newest restaurant of very It is X in Hawaii In about normally we Hawaiian While closed fourth on of locations announced previously December, core the event talk the significant we our a our members a corporate partner. hospitality fact first, during market. the The competitive a was above-average of restaurants the restaurant. acquisition quarter. acquisition from longtime business strong most the margins

months. working quickly a exceptionally for are these integration that to system X next over acquisition of our restaurants into the and We the X are deliberate pleased closed managed company-owned

our Denver, opened the fourth represents Center during restaurant company-operated restaurant the and base our fourth second of location Colorado. Tech Center Denver the new be in opening quarter, expanded with the is one to organically Tech the also suburban company-owned new in We restaurant in The in XXXX. area

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

the of priority is announcing on our into look both continue late We first the once additional ensuring half we been these for aggressively the sites lower XXXX leases our successful year for to and work While have signed. Hawaiian forward XXXX. integration restaurants, to these of

growing continued addition footprint, to In our evolve. have we to

We for. have of consumer brand ourselves on business, our invested the core our focus going in and intersection what stands at is the placing and we where

experience operating year, the restaurant to capabilities. remodels, and we During guests our designed enhance completed X the expand

to additional complete XXXX. to X remodels an expect XX in We

continuing who Our remain in restaurants. to and franchise partners heart their the also business invest are our of soul

a their quarter, restaurant the Canada. Mississauga, in relocated franchise During partner

open in one are one in partners in and Indiana in Wayne, quarter. second fourth Ontario XXXX, to Additionally, Markham, expected Fort two the the restaurants quarter in

component we've strategy cash dividend In our the returning I'll $X.XX total are XX% summary, additional who of Arne, We share significant despite shareholders our results. of third quarter our continued year-over-year. shareholders, share for an shareholders. will results. which rebound share XX% Directors saw is a to acquisition demonstrated now store the of With well we more growth represents our end from inflations capital fourth discuss Arne the turn beef years, reform, Hawaii. Board repurchases The the quarter, further, quarter, quarterly over a of tax provide detail of quarter organic earnings our strategy our fourth we Subsequent past X through dividends to and of returning excited level payment XX%, of by to this return the sales on return our $X.X will by by in our the fourth over by margins total revenues positioned to and the restaurants and million us XX%. about the in per complemented $XXX call return count back approved growth, five payments. restaurant In in and tailwind XXXX. has which increase a to the repurchases, Reflecting while to return million dividend through over growing

Arne Haak

Cheryl. you, Thank

net share. a charge XXXX on Hawaiian with $X.X quarter million Net of impairment associated income Cuts in The our or We to during $X.XX million included increased fourth XXrd per Jobs also $X.XX approximately location of fourth $X.X Tax in Act For the share assets income quarter quarter per that $XXX,XXX we XX-week H.R.X a noncash the earnings XXXX week the compared the known of restaurant into of was and the related deal-related XXXX. estimate $X.XX XX, December franchisee. by XX-week diluted signed million $X.X of fourth one net expenses as fourth XXXX. the XX, income XXXX, quarter ended of in the to law and diluted per reported December or share acquisition at in

the While tax in of it tax company's tax act our the will lower in $X.X also significantly net reduction deferred this by assets resulted million. deferred rate of reduced rate, the This our value assets. revaluation

Additionally, other during net to the items discrete discrete per these quarter, Combined, by $XXX,XXX share. fourth income reduced $X.XX related income recorded tax diluted the income or $X.X items. company tax expense state income of tax million

XX% the these were fourth to quarter million the Excluding last from in discontinued $XXX.X common for $X.XX our earnings quarter, X.X% XX.X% of quarter fourth quarter sales weekly the as XXXX. the restaurants weeks in as of of up quarter $XXX.X the fourth from XX XX-week compared last operating XX-week weeks The restaurant extra additional results per the XX-week sales during for diluted in fourth Total $XXX,XXXX accounted operations, company-owned for Total of of were quarter from company-owned non-GAAP year. of fourth XXXX from share week fourth an well the XXX restaurants XX-week increase the operating X,XXX, were year. in adjustments quarter million, Average year-over-year fourth the company-owned $XXX,XXXX in were XXXX. for up $X.XX XXXX.

in year. which closing X.X% were our end total international in reduced and sales accretive Franchise the offset operating our in million, a in were to the comparable acquisition basis. In was additional Comparable quarter Hawaii our X.X% driven modestly franchise the income by the franchise, domestic added by of during up an acquisition a from sales decrease X.X%. partially fourth was and franchise was our the in addition, down in was X.X% the year-ago on of sales restaurants quarter. The increase income $X.X franchise the franchise up Hawaii the This comparable from period. the quarter XX-week earnings $X.X XX restaurants royalty million of to restaurants weeks

sales Now our to turning XX basis increase increase as restaurant in year-over-year a increased Food points was to costs. XX.X%. This of total costs. percentage and a beverage costs X% beef by driven

basis operating the XXrd percentage quarter, points year-over-year of sales For as leverage a driven was The compensation. to the XX by decreased XX.X%. primarily performance-based to in reduction week decrease restaurant our and related restaurant expenses a

the to Marketing of costs X.X%, driven of XXX performance-based was as acquisition. as expenses advertising compared of XXrd the revenues Preopening points a $XXX,XXX by reduction percentage to in primarily to of and across by percentage revenues a to marketing deal-related were fourth on by shift leverage basis the basis and points of a spend costs planned Our new for due offset to expenses costs $XXX,XXX XXX X%, a to compensation, decreased $XXX,XXX fixed Hawaii decreased XXXX. related the quarter G&A by XXXX, driven total restaurant timing openings. primarily of week which partially in year-over-year total

credit in fourth facility. fourth of $XX stock $XX.XX During quarter, At debt the quarter, or shares $X.X XXX,XXX company the share. per the under had the our also of outstanding for million million senior repurchased common end we

debt. million. During our borrowed debt, shares million $X paid quarterly in quarter, of down million and $XX of we Hawaiian a balance the at pay also we million franchise. $XX to million paid our debt fourth in quarter, $XX the used the repurchase an and purchase the We end finance we to current leaving down $XX had additional to Subsequent dividend,

recognized of outlook, that generally expense us In restaurants be against marketing us a Further, these in our expenses. all as comparability franchise this standards number XXXX, recognizing standard policy in I'd a the completion will XXXX-XX, of fees to few forward revenue franchise practice this contributions These amount. standard increase to ASU contributions to I impact will increase similar changes adopting to received requires recognize to the obligations, we'll which were going of address marketing the opening change matters approximately upon franchise income Before impact new initial will the agreement as accounting a is The require upon that as from and referred by occurred income. franchise of standard. In the of impact advertising compared standard million XXXX. the by XXXX $X.X get and that material credited be our now which XXXX restaurant. fees previous generally franchise as recognition XXXX, term like couple over ratably well

moving a as gift our reduction of recognized as certain a evaluating sale discounts of historically expected expense revenue impact we've be the are on recognized whether overall also We The of these reclassified on marketing statement. revenue recognition recognition marketing immaterial are and our cards, income will to which line from we to changes are costs the support been results. make be have the net standards, revenue certain marketing historically allocated that present support to to administrative G&A to the better Separate advertising. investments to and we

feel Finally, our of aligns our our if balance periods the it policy appropriately part to has will the peers. standards, restaurants and of on better comparable XX for measured this in revenue XX us be changing of more our been review months. in are quarter enter our policy This group as a first new restaurant also now honeymoon months we of change means We markets recognition that the will months, the year, XX with open reflects annually. which comp the from that

restaurant comparable restaurant calendar each the be week a reflective both to XXXX, sales Because and be health I'd metrics. quarter key on believe the will the comparison our our provide of full outlook in of for XXXX year calendar the we of our information of affect fiscal for Now is base measures XXXX based fiscal will sales XXXX. of comparable in quarter reporting X this We the year, overall ahead some same of the business. more will our for fiscal that week Since calendar XXrd providing XXXX. cost week for current like XXXX in

XXX contains As $X year XXXX Subsequently, will of lower both in and first it quarter previously New comparison Year's as approximately approximately mentioned, and Eve. made lower began the our XXrd sales quarter-to-date particularly Christmas fiscal strong the a points. our contribution million than comparable Day week the XXXX fiscal to by earnings basis

to by the acquisition the into Easter us revenues. and in of current our approximately will Hawaiian roughly The XXXX. basis quarter combined due cost XX average sales first addition, the great franchise sales this running than first our calendar decreased are holiday is currently the flat. We that point are million quarter comparable higher doing sales shift XXXX group points comparable XXXX quarter the $X.X in produced Due results In our tourist-driven the shift in year price believe To from first in back brought that higher which a generated of than This, last the to second Easter. higher quarter, Hawaii, $XX business of in nearly checks restaurants, system million a of economy, average with in royalty average. in mainland restaurants. menu XX% the

will and territory incremental depreciation, annual $X this an Additionally, purchase for add driven the assets in acquisition accounting the million by franchise rights.

reform lower tax our you rate. aware, tax effective recently As the will are passed

to prime impact to a strategy. the range our expected expect XX% the In our business to of drive in of XX%. ultimately, which cuts prices. driven our to of in regards as the were us for in was rate value back is drop this team summer shareholders. balance incremental We in and of saw interpretation, year rate to effective XX% demand of benefit plan importance certain well shareholders. driven invest our see we cost goods by year-over-year. the an Tax of investing tax our total to XXXX, XX% currently importance from business to X.X%, While we the the year uncertain was that of to to aspects our somewhat recognize capital inflation subject X.X% are still enable up lower by prime say the restaurants, to it flattish volatility enhance beef returning terms members We of sold, to to our will return which increased tax We safe beef the as In retail This cuts, and prices in the particularly into Act months. full

expect to continues supply X% year, to high sold the expect of retail beef the currently levels, of in prime goods resulting beef of Although, inflation total in demand ongoing to our to the to for XX% historically we is expected XX% cost beef of and restaurant remain range X% sales. be We at full continue, inflation. of

costs expenditures questions back under program. to currently We capital between turn of total of currently and expect currently $XX call G&A also $XX be sales. be and With between Sergio million. to between marketing XX.X I and now repurchase restaurant We be exclusive million to and between fully expenses million. be I'd company's of and share have. changes expect the to We we shares, currently our might the for share outstanding be operating shares any repurchases restaurant like expect to expect X.X% inclusive currently We over XX to million the any that, $XX XX% XX% diluted that discussed. expenses our expect X% between advertising of and previously revenues, to $XX million We

Operator

[Operator Instructions].

Bank. now question take first from Deutsche our of will Levy Brett We

Brett Levy

couple of questions. I guess, a

a comps. just on is, clarification First the

us -- get give quarter? few. just, first -- just to that? to XX the then next it, or can ahead period is said I'll full the you months, after clarify it And each turn we you you after quarter the restated first enters will after of First, that the And numbers as

Arne Haak

at year, be XX so start for the restaurant the will has any been in that open -- Sure, The comp group. will policy Brett. be of comp the months

the first year then first next until -- year. won't that we as the of So of the and refresh list the of

your you the you So make can point. have and to measuring between off-line noncomp. counts right be sure comp We with that will follow-up

Brett Levy

Okay.

than much a How towards little question. Hawaii? thinking. that's higher of going CapEx, towards last other I was the one going on number How much is And just in Second, refreshing came areas? then

Arne Haak

Sure.

that of it So a tiles are $XX kind splits million X-like neatly piece. about into

assumes some The XXXX And it first a have new we late site. and well. units, restaurants that we coming in $XX goes XXXX as that million early also towards in assumes or XXXX have that

remodel The the XXXX, both And remodels. CapEx, is well last well will maintenance, there as of XXXX. also restaurants. Hawaii in for from which IT And million is class carryover our our and has $XX around the what some I maintenance it CapEx as then second million $XX that the largely standard the includes as money our restaurant investments kind CapEx. There's call and for some corporate in

We some business our have other do well. would there's in part that to and a things we invest of remodel that like to as

Brett Levy

sales. finally, on same-store And then,

the been for had think of indicated came what just that that math XXX the XQ? you comp the words, other much do for basis the had shifted is holiday comps, it XQ we quarter, a With How that the you the would list XX of much simplistically had so Can as you out better that do core quarter in in? season. fourth points into

Arne Haak

No. occasion It's month was the for of not very quarter in of comps. business the really is special clearly, The year quite It's December us. strong. time great terms that of good. a simple. It's But the best

only a do I to it had was the we fact, not fourth more think marketing in throughout lot a our little probably year, lot a can P&L with we we quarter line a as by costs you surprised the give had were later our in I quarter, rest the but pickup we was, of And November. and well. in marketing all. also how color had on softer the spread It at November than the really the

We pretty good. every month. up of what weather things had was feels year was of flat So It between similar very year, going to cadence. of I Last kind to, and think, business a all the last overall, on. feels saw general kind like we

and that like one good. we as our this But into go business quarter. some stock saw that. year stuff movement that slow choppiness when holidays down. first and definitely in kind The the quarters in sales out the here place really We have market of the of went feels was You pretty saw we of the

wondering volatility. you're what to on we're as well. it being a why the There's very if that and Day also correlation stock Wednesday we has saw market volatility the market sales do lot to Valentine's So flat, we in strong to with a and a saw

Operator

Barish I now next from to Jefferies. our will Andy question move of

Andrew Barish

Do number change comps standard? what on the like in have rough 'XX you look have the the would with

Arne Haak

all. doesn't change improve at isn't really change our -- It dramatically I think, or, going change we comps period. much It Andy. this Sure, comp our how to doesn't

So we it's little people more are -- XX are we've always different. Most at a known, we were XX bit months. months,

So revenue like our and looks standard to change recognition look XX from story. at sales we go when comp the and came moving what really volatility decided through, going but -- story our to to back XX isn't

Andrew Barish

And quarter. just the Okay. on then first

out I You're flat a we XXX digging basis of kind basis? on point so trends, do guess, a about hold, of but think you're the normalized how quarter-to-date,

Arne Haak

So year calendar about kind $X this we the first New behind comparisons Christmas a for On in yes, messy million which XXrd Year's to different joy comparisons. of and week of the basis, a fiscal when purposes, had And XXXX. is the basis, use we're because you of all started year-to-date. running modeling On there. we first have XXrd comp XXXX you week you a in week flat two look at week Eve is would the having

X little those a on to probably, and work are those we'll that. comparisons. think, are about being need I the But clear So --

it looking is by which of point fiscal week. basis, XXX it driven at a So if have the lot this headwind, of you on you're a basis kind

calendar looking now. flattish a which you that at If of away, kind on you're should basis, at take right trends look

Andrew Barish

and/or operating that you expense, are from backing what terms seeing people then underlying windfall? some investment tax assuming, guess, And I some restaurant you're in the the of inflation Helpful. of

Arne Haak

probably retail. the investing making happens In question beef we is of what is little points plus within But a do keep in. and or back a and XX, overall, I affecting a the our of last of bit menu, over the watching guess, variable should have right little how investments see think and But in margins inflation, year. X% our we're basis now minus I XX I there it bit that biggest kind we our margins. with price think, probably

will level inflation. that big in it's So Obviously, because we're sales we goes. restaurant investments changes in environment manageable. where because margins beef the But material the affect of making there's of no think or

Operator

Piper question from going go -- next Miller will is Nicole from Our Jaffray.

Nicole Regan

the How impact they for what stores did comp impact Hawaii the have and quarter? did fourth in XXXX

Arne Haak

we Nicole. a brought not in like Sure, new them restaurant. is Hawaii our group. Historically, in comp

made our the yet when We comp are right they but they noncomp come group. group, now haven't will on into in decision our

They they not have had it them, in we mainland but the base to a did days the $X.XX the sales them, them good -- the So the our and XX in XX was to fourth business had really days the we're the And happy fourth for quarter. in quarter. roughly earnings influence they have comp quarter. that wasn't for pretty a material to core It fourth change were delivered quarter.

Nicole Regan

XXXX So consumption? there presumably or in into you to went than factor they XX-month potentially an have that way slowing why is

Arne Haak

It's certainly, to comp big group did that going we not obviously, when decision. It drive a think, in. into bring our is it come it's base our I

our period. we're was and I that appropriate the around what's restaurants is think the our what decision seeing more volatility on

made Hawaii make comp driver decision. and knock we'll complete we the our no, bring went our to into and think on to as base didn't systems It the of I comp influence. restaurants on how it the sales. decision we the But, group integration key our wasn't

Nicole Regan

way And I be third basis we are your for if that eased Comp X%. was potentially What the how X% low what the by not digit to miss expected by points. know have And up fourth the may XXX in only and be expectations? impact, single drag the been things did did or the model the quarter the compare this would were then chew I versus world higher works. to I comp quarter? is simple hurricane comparisons math it up and comp believe,

Arne Haak

Sure.

basis it's affect. to hurricane year, of for around XX the the regards full somewhere points So in

points the was it basis over wasn't bit in XXX little XXX. quite quarter. a third It So

you So absolutely are right.

much last of bit we against In Third quarter we'll the how year of the our very the the see this I hurricane spend And a with heavier on last year, tailwind with all look We year outcome. full be communicate inflation because comps, we earnings to spreading sales, despite November. think a and period We're through can we to pretty marketing the biggest hurricanes, year. summer. in that's year. the lot flat we to the comp, did good. split a were do have fourth quarter despite kind We that will versus the despite at with that change regards we going up results had -- positive produced, lot And throughout we it was a what out expectations year. marketing and had I more traffic -- the that pleased We November. think, in XX% a

the occasion a as this we the holiday, great the night. much was great We business still year for night very the great special I had we think Wednesday over was same the occasions, I Day. well. still a But very good Valentine's a had days. all it Saturday wish Tuesday feels a special as So us had just

Nicole Regan

as specifically, What's last marketing November as a you then quarter suffering cadence And for the XXXX? just my question, by change. on from marketing comment

Arne Haak

sales, of to I'm year-over-year. the Well, going the I at think, be quarter second a best the is to the year way percentage it's sure. consistent Sure. throughout as... of pretty quite exception, little terms But it with higher bit not go in

Nicole Regan

year of So the split consistent this or equally with amongst the year? quarters X prior

Arne Haak

Both, both year-over-year and sequentially. versus

Operator

[Operator Instructions].

next Raymond Our of question James. from comes Brian Vaccaro

Brandon Sonnemaker

Brian. This for on is Brandon

could does the assume other menu about components inflation you On of the X, to of some the see basket? that through I talk what cost could 'XX? expectations? And level guidance, X commodity pricing XXXX in of beef walk you

Arne Haak

Brandon. Sure,

guidance. bit roughly, the back just little heard and that little menu than over you in is -- the year We on right of our now. price X% lower the in bit half beef a Beef a have

expecting of X%. looks we're driving I think overall, flat the to is inflation. up kind pretty Beef good. Seafood

the what The right of kind kind basket. is about we areas But think wildcard us. of overall producers X% up overall, are having is other that percentage for biggest now a around this the

Brandon Sonnemaker

break And XQ real That's Okay. the price Could helpful. versus comp. just down with mix you check? the quick on then the

Arne Haak

Sure.

So had on right X%, quarter, we in around the fourth again, price.

negative So mix. some we had

in is that's coming of growth, total driver pleased think, negative the in with is the Some at negative there. we what's we're what mix and and the we're bar had of from, robust what's overall with But and really happy it. sales we're restaurants, that I happening seeing we've that sales -- really happening bar biggest And look the mix.

Operator

Instructions]. [Operator

our there in or session. conclude question-and-answer for to call And As queue, the today's speakers are like no turn the any further back that questions would will I remarks. to additional closing

Cheryl Henry

it's go Have always everyone. day, And eat as like a for great say, you to day out a steak. me Thank all this great Mike very much for call to morning. would our joining and

Operator

disconnect. will participation. you you That may today's for your you. Thank conclude Ladies and Thank gentlemen, now conference call.

Ruths Hospitality (RUTH) 21 Feb 182017 Q4 Earnings call transcript