RUTH - Earnings call transcript Q2 2018 | 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 second-quarter 2018 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. Tracy, good you, morning, Thank

and Joining our President Executive the call Vice and Michael O'Donnell, today are President Executive Chairman; Haak, Executive and me Financial Officer; Officer. on Chief Arne Chief Cheryl Henry, our

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

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

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

Michael O'Donnell

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

XX.X% demonstrated Highlights net of our share XX.X%, continuation X.X%, of to start year. of non-GAAP results momentum a growth the quarter of the earnings We and which are include second-quarter $X.XX. per growth to pleased the of total growth income announce diluted of from revenue

non-comp Hawaiian as including the acquired revenue December. restaurants well our contributed as restaurants comp in growth the six to the of in we the quarter, restaurants, restaurants, All

sales pleased continue with of delivered expectation. Hawaiian be at to very restaurants profit growth or and our they the and above our We performance

Chris which these stages turnover and restaurants. proud the management of in I been of no our to consistency teams the brand excellence. the focus We through This our the the committed unrelenting all Ruth's our long-term leaders over fine have total to in our there us years. being that for for strategy, execute integration, steakhouse and has achieved final in on am we results to We consistency category, creating The House are of remain operational allows foundation of the experience note is our return Steak dining responsible value stakeholders. is

capital strategy in we As growing this in is before, core our to investing returning our execution have discussed by a business, successful of investors. and fashion, accomplished disciplined

will that and - and sales remodel driving, strengthen which restaurant both XX% our experience priority and core tax Our track guest in on us To of this worked XX-plus the evolve consumer, for expand years and investing last X.X create. XX% continued today's seven the with be XXXX our and are always first protecting capabilities. the have Ruth's enhances core to we brand remain brand, XXXX. evolve nine form initiatives. during savings to in quarter, today's hard Furthermore, the brand we allows We our business business our into to over of remodels our so people efforts to for many the consumer operating

build in a our and to our second the to The priority is strategy growing continue pipeline. work development of brand diligently we disciplined fashion,

fourth be quarter the Jersey, balance third the City, of We Jersey, in location here expect the Jersey to another in open two quarter. in will XXXX: New new the first Paramus, restaurants during and New in

Cherokee, our Dorado operating our agreement management XXXX. Tulsa, Resorts Reno, Oklahoma, restaurants a expect casino successful to Nevada, in early to currently North will location agreement, a and in with restaurant similar we in third Carolina. be management partnership This the of first under open El Additionally, quarter

sites additional supporting meet our for as XXXX. We that growth partners, XXXX our also beyond. two build for franchise investment efforts real negotiating criteria to continue expect open restaurants, our and in pipeline we locations who Also estate development for invest the actively in and are our leases are to

these cash have beginning a August the of shareholder Fort total to recently dividend over Wayne, opened in The locations is component payment shareholders. Markham, increase Indiana, we To in the and quarter. in of repurchases. quite believe our this XXXX, to to share is quarterly paid Ontario of quarterly million the the end, approved second The strategy returning total of to shareholders, the our the And first second which during a shareholders we our is $X.XX way Board payments $XXX that that expect value. form continue of quarter of strategy in we of best Directors long-term return returned of dividend Since of during successfully XXXX. fourth open to XX% franchise And the capital our final currently our over year. return to the drive dividend

Now be and will like of transition before I assume the more I to Officer Chief Executive Executive role management from This a early part Today, pleased Henry comment we planning in on and for is Chairman. process, President Cheryl to executive I multiyear call of our President turn I'd Cheryl. transition briefly June. and transitions couldn't Chief and the announced Officer over, which Operating

by every has Company. implemented attributed before has she managed eminently strategic results. as and years Cheryl, direction will CEO? Arne excellent of be success been call has at to XX role lead With our shape Chairman. our is to A clear led now second-quarter turn the and to give new will revenue the on more initiatives on over Executive my forward some can in that, to provides performance Cheryl organization. supporting Company spent is look Cheryl Madame the directly I she this I the for that who color team. and detail aspect of commercial and in here her the much qualified The Ruth's, set During our business

Cheryl Henry

Thank you, Mike.

all strong key across segments. quarter a our revenue operations performance three this team of Our restaurant contributed

During Day choose as Mother's and growth the comparable solid restaurant Ruth's our continue Day these Chris business to We again special year-over-year saw special celebrating when on sales Father's quarter, both occasion drove growth. moments. sales guests

We also private growth in segments. a resulted dining X.X% comparable and decline against This our sales traffic. in X.X% experienced of just-because in growth

a fine pleased we higher growth experienced Black in significantly As our quarter the due traffic to reminder, a see XX-basis-point holiday. index. of headwind am timing that the is the than Box dining the I second Easter to

remain up X.X%. comp soul had also our a Our with heart quarter, franchise partners, who franchise sales of the and total business, solid

US, comparable sales trends those saw were the improving international While our partners our quarter. sales strong in trends the markets as throughout not as in

As like this year our With remains we the quarter, far date, trends in details. consistent the over we've our sales year. go Through third to look comparable to our Arne at have so I'd low-single third running the year. the this point quarter over been call digits that, to flat sales financial up seen cadence through turn to with to

Arne Haak

Thank Cheryl. you,

income Hawaiian in deal-related of income income benefit second $XXX,XXX in ended or of items. to our during For XXXX, per diluted franchisee tax $X.X X, income the million the included expenses quarter net diluted associated and we tax XXXX the the Net the compares related of per of with net reported share. $X.X second share million of a income of to $X.XX XXXX. quarter July second $XXX,XXX This or quarter discrete acquisition $X.XX impact

the were second of in franchisee reclassification versus sales income prior Asian franchise and quarter. the driven largely well in X% XX% The restaurant these sales, discontinued franchise in comparable last advertising was X.X% up and year marketing per as non-GAAP Company-owned were for domestic year. Excluding certain comparable contributions franchise over common the quarter over from in fees. income our our X.X% Total up in Hawaii operating well million, of operations, up comparable locations. $XXX,XXX year second the diluted Total the of $X.X the was in increase share sales Canadian site-specific driven the our last year. up by XX% $X.XX, items, of from to quarter acquisition XX our the compared quarter increase quarter weeks The Comparable from as the the during year. year. by of in restaurants, increased operating included $XXX.X contribution advertising result as in and million, franchise including by franchise Total $X.XX from an those Company-owned from XXX our development over year. Franchise our X%, were the income, Hawaii. And were for weeks of was quarter down recognition were X,XXX, an restaurants. as last franchise franchise increase second softness new sales earnings increase in additional all This second restaurants to acquired restaurants restaurants restaurants XX.X% in an driven the in year international sales

Our also of reduced acquisition of franchise income was Hawaii the result $XXX,XXX a by our restaurants. as

Now as quarter turning a over were be a to currently full-year food X%. as deflation increased driven to returning before decreased X% as experienced in summer's This a XX% by beef in And to of not prime points and to more our beef retail levels result, beverage expect have costs in was the well year of due check. retail we decrease deflation to highest we driven beef costs, restaurant the We quarter. this year, the year decrease third percentage X.X% Last primarily increased levels record-high now prices for demand basis XXX sales average demand. XX.X%. to total as costs This a increase normal by in beef. to fourth expect

a increase restaurant as of an occupancy year Hawaiian as in our restaurants. quarter, primarily percentage points acquisition increase by driven to the increased operating For year The XX.X%. of sales result basis a expenses the over expenses restaurant our was of XX

increase by XX restaurants. The percentage expenses total also basis the of was percentage was to to G&A and increased were the Hawaiian accounting Marketing as percentage of related costs a integration a up to a recently costs over revenues total revenues XX primarily revenues X.X%. acquired total points discussed The additional advertising attributable largely X.X%. the driven increase points as year previously basis of second Our Jobs at the year compared as changes second largely in costs from million, were quarter new in the XXXX, quarter Tax Cuts revenue declined a million as contributions the well by of a in restaurant and $X.X openings. tax of of as $X.X driven marketing to as increase $XXX,XXX the enactment timing of XXXX franchise of result Income to Act. spending. advertising of the recognition $XXX,XXX expense planned and Preopening of

reinvesting As his XX% brand, Mike XX% our remarks, these tax sales form we core people the savings business to mentioned initiatives. into of approximately in are and during of driving,

share quarter, second over outstanding we had repurchased or common share. for increased shares largely $XX quarter XXX,XXX expenditures we $X $XX million the just of quarter, share authorization. previous from per We the of stock million outstanding, announced driven up repurchases. $XX.XX of as the previously debt capital repurchase as the by the million At timing our $XX.X well million ended During with million under quarter, in end $X.X the

I'd information revised to our of like XXXX some provide full the metrics. Now guidance, to our our year financial on for based key turning of current outlook for

As Cheryl has current far our the calendar-comparable the with with shared cadence pleased in you sales so are third quarter. previously, of we

the a a have sales. on XXXX reminder, XXrd will our minimal week As in third-quarter impact

will headwind current quarter deflation revenue XXrd will of now goods to week, holiday our result the of sold exceed fourth earlier last in the once XX% timing strongest of in fourth of but $X again year's expect Year's expect XXXX this revenue as currently the to this of XX% range our provide estimate of New Based expectations the we be year in be provided Eve we that our on We a restaurant a quarter. to sales. call, million the cost in quarter, beef

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

of discrete continue million and We $XX now excluding costs our currently We impact of the rate marketing and expect capital to be between be expect and tax between to expect and grow G&A between could items. million, costs. We XX%, on million tax to expenses openings. to expenditures Hawaii and be timing now between million depending effective income XX% annual We unit and integration the $XX be excluding $XX additional our new X%. expect to advertising X.X% $XX

With fully our outstanding shares shares, and the to share now any between like under million call we share to questions that, XX million the turn expect to Company's of continue over repurchases program. exclusive repurchase I'd XX.X might be Tracy any have. for We diluted that to

Operator

[Operator Instructions].

James. Raymond first ahead. Vaccaro with We will question now from take Please Brian our go

Brian Vaccaro

performance then you Black does sales Was traffic on the high-end the you competitors any to seem period. accelerate pulled that wondering the versus Do the It to that out And start gains if the first have wanted other you reinforcing I your out-performance called encouraging during that dynamics segment see quarter. out. driving do out-performance? with positioning could back highlighting? think or quantify you value And in it's Box worth some is is what discounting. think that maybe your share

Cheryl Henry

Brian, thanks question. for the

index about out-performance. the asked the and You

you, at employees Mike we it, around As quantify the an we've competitors, And that promotional And tell experience June especially are our is and business. Mike over it, in probably discounting, about mentioned also points look executing XXX and the making ensuring just Arne stress increase we that July. development I on mentioned more the from we through question this brand and think side. every seen it from And the your talked traffic of less to will strength experience. of investments the basis in of are discounting, the all I about and I we of time. segments retention executing cannot importance activity the

from a the I think But year, that something to Arne, the set. will, of look some seen the kicking are can't say have know from lessening about continue we on see. will been I working ops I think I probably I've of that focus as don't on competitive The in. if the we promotions, that talking and Again, continued teams. you So if-- we through that's initiatives execution

Brian Vaccaro

is the Thank And helpful. you. in environment impact just that is also any high-end curious, that the that changes expenses, thinking evidence having certain for around your space, industry any within about business? the law an there that's evidence Okay, tax on deductibility entertainment

Cheryl Henry

No.

haven't having seen We an but any are indication impact. really it, that aware of we that's

Brian Vaccaro

What line. thanks on in if the basket And the Arne, gears, for the quarter? just on deflation the quarter. the was okay. couple cost comment overall Okay, in deflation beef could shift I food second the

Arne Haak

quarter, running the for quarter. were we In around down the X%

Brian Vaccaro

COGS cognizant that about in And overall deflation was are updated annual okay. helpful. assume And guidance, overall Okay, what help us You other were you there terms the items basket? on specific of beef, basket some But the we with be of the expectation? of? in which terms does could should deflation

Arne Haak

sure. Yes,

in right best see. the think I we now are clear, You are know, that the we I overall basket, to think, the trough deflation going

For on can some have dynamic actually pressure And obviously, year, tariff items. some the been we full the seafood experiencing be situation well. there as

know are third you, overall but don't prepared I deflation, basket going that of this here the an we give in terms second probably quarters quarters. in be COGS the like, it's the and to is So to strongest

Brian Vaccaro

we Or Are ratio assume is sort will, Thank comparisons ratio, of forward? Okay, ratio that in COGS materially and different? okay. more And quarter keep COGS last fourth items you how fourth be should one, quarter sequentially reasonable taking might cause into the you. the different just it moving account stable versus high are, if mind a third-quarter on COGS COGS any quarter. discrete versus that third ratio to the to there

Arne Haak

XX% of by I we terms had we not we hopeful Brian, in think the the We ratio third normal here hurricanes of And than year of season. that active are itself. had guess season are know, seasonality to hopeful fairly benign. repeat that hurricane September in COGS of a stays other You that's of that always last impacted so restaurants Florida; our sales. would in and unique the we I can't are the quarter anything

Brian Vaccaro

along. Thank All it I right. you. will pass

Operator

Joshua now ahead. from Long question Please will from Jaffray. Piper We go next our take

Joshua Long

transition. Cheryl, new what forward. order your on answer for the to as your going on of or you imagine in of you on I you of lot and thank going brands curious questions. Congratulations, a But be role? is go focusing to consistent your are how execution transition, taking this going through first the same brand kind business more the be focus the Great, my on

Cheryl Henry

to for look I next years sat we they sure would And and they days Sure, me thinking that was similar. have look the someone thanks do was here, looked past the strategy for years - XX I senior out, set it question. I of the and XXX ask I'm what team about pretty fortunate kind XX so very the as the as like.

I have team think we the to Mike stated our we strategy; implement have it.

the live the idea so more the sole we that demand. probably last talked sure year over of my I've evolution that. to And focus meet we is a in of constant consumer state about making do

things us will team But be with return again, we've about So to total we this talk on strategy come what the more doing and the focus rolling start been working more to continue into system. doing. the and there to great

Michael O'Donnell

do she expectations is have job better than a I going to I did.

Cheryl Henry

Mike. Thanks,

Joshua Long

to makes what a are definitely gears as And to calls the sense. place we've there's to this. that something you've nine different. might that systems. No, track. you variety unit see learned I slightly gone talked shifting every nice have in across packages remodels, through Because of still conference seven can different over on Curious know always put multiple that need that you the and

progression the opportunity touching on what out. are terms how remind are And in system. XXXX. you then we different the for roll us so all of look like where Trying of seeing the get of if can And to might units remodel in a curious that you sense

Cheryl Henry

Arne. it will and to then Sure. I turn I will of take a it bit

VARS. changing you XX this we close to XX or point, X.X categories them early think and remodels, capacity X bringing up year done, a XX ones of different the of at system. look program brand how until done have I to between through kind about we think your continue to when at buckets so question the about or the are And from to to had to adding really I started talking this we So of we many we will have and are remodel,

we the on think identified through that that I as pull expectation. we've have having them around ones capacity, seen opportunity

to expected going want if The others in bit looks that around relevant sales about guests. weigh we And brand the of capital them do. to and on being a expected consistency really you little are what our how Arne, doing it the is forward. and to maintaining

Arne Haak

our forward You know, go CapEx to piece of we year. a I think be Josh, as it's consistent-sized going fairly by

We The there the to when returns, are opportunities as to - of is - capacity that. capacity, really add of have Cheryl grow it a those best provide There case-by-case situation. a is and each sales. a lot mentioned, as capacity kind catalyst targeted those the one provides not

So about think good feel we I it.

is We to question, a of and think way well. brand be money And the needs good what us some continuing understanding I for to consistently do of may back delivering have going traffic as gains in been driving what Brian's it. the the it's invest to

Joshua Long

the reinvested. for Thank are to that. on XX% going savings Curious the to Absolutely. you XX% be tax of

trying sense does spread remind that how Is you you and of certain differently, and many in people entire be around dollars going driving, parts how a out strategically portfolio? across you portfolio. to retention. specific how Just of system? rolled that used using touch your the be brand, anything those mentioned could to would I get sales add? more - us the are But those. looking kind Or maybe If it know you at could

Arne Haak

And are sprinkled. of they. a they question, kind where like great It's are

Some of restaurant the in are line. them

we key So them. important people and we we think doing are targeted some with have that initiatives, there is some like things very are people

- well some have we also also level broader important. think very at restaurant the as that's We initiatives that because

some of of the also in is G&A is it in line. marketing Some also then it and

money. seeing places you three where kind of the are those are So the

Joshua Long

one me. Got then it, thank last you. And for

has for terms little domestic talking seems we of softness the thinking same-store a the between Canadian here disparity while. In franchise Asian been about and been strong, And just pretty have about obviously. it sales, the international, the the then like

lap might keep over of just XXXX If we issues to that go through some is the you is back that macro aware of of. would on may in that those some half we be worth markets we if can remind be or anything into it that, then if there as or us And what just driving pointed concerns the more noting. should XXXX radar be

Michael O'Donnell

Mike. is Yes, this

been Kong. have affecting it know, been about rules their has You and tourism not challenges been - bit had Asia, and there's and some restaurants think changed little around faster Hong the while. as robust. particularly business we've regulations recover some it before, than talked that a will. they And geopolitical to that I think Taiwan China has do but Asian of certain And Canada I will the has oil with that a for some things issues had

businessman our is softer franchisee I not a saying his that restaurants continuing these Stan am And in build great weathering business. invest a Although, into fabulous is sales. and and Asian Ko job to back franchisee continuing doing a great to and

Joshua Long

Great, thank you for pass it that. I along. will

Operator

Instructions]. [Operator

go We will now Please Barish Jefferies. next take Andy with question from our ahead.

Andy Barish

sure morning. fiscal sales I'm this if that missed have same-store - Good there not the may Hey, - quarter? difference number is Arne, I calendar in a in

Arne Haak

Nothing from week, XXrd other the shift, which which quarter. the on than called bps was we XX Easter really a out,

Andy Barish

on And franchise is restaurants? maybe of system Cheryl effort of the their in of sort on the then modernization stand where of kind in And a as terms sales franchisees running Company-owned, sense higher franchises going of well? can more the the Okay. remodel than domestic give there

Cheryl Henry

for And franchisees. will looked turn we quarter But the a to Sure. the Arne I at in just second.

see for a and or it's aligned some X.X, more the there's don't have Arne, anything you. can really I say, would know franchisees. are He four really are as if of additional in to saw five their add. remodel. are, there. think remodels you a our are price you and They things. price of want Mike through forward is was in speak There And bought restaurants, go we I up Savannah into they in is just so and to performing point, then somewhat And to some well back remodels. They know traffic a fantastic I glad your couple investing that. and couple I - are that to line; more there

Arne Haak

in biggest in other we Puerto that, have is look they on franchisees the sales we that Cheryl at the - said, Rico opportunities. And the domestic that invested a growth as of and the that And a difficult very well. the that, last to thing them are, after chime capacity had have those Yes, very remodels rebounding traffic, ones ones said, the is when - year. that off only have as second nicely the particularly as restaurants, are some And couple there's remodels. in they are paying thing

I think some there so they in innings remodel, are a good is well. earlier the runway little as of there

Andy Barish

on mix the Great. finally And then just XQ. in the price

Arne Haak

Sure.

anything terms mix Cheryl got her the three as - at the think comments, private three sales. revenue in of bit I mix, concerning. and look mentioned center, are our of segments we had bit we a In pleased. really a bar, think all positive dining, we I In All it's of of and business little little faster. growing are restaurant particularly shift don't kind The

but preference little norm, bit. little We moving it's kind the just of Ruth's bit seeing a Classics, are in still with historical - but on line a higher still

We the whole over have bit X% price little just a across in restaurant.

Operator

hosts it closing to further for There back to now are the turn remarks. any questions. or like no additional I would

Michael O'Donnell

And my is to you all call much want will assuming thank for a these your take to forward. going interest, XX a Okay, thank you years I approach all responsibilities as for up for engagement. us. you. thoughtful This has last for this hosting dialogue, Friday XX years. It past been joining this call. talk time very all your be moment to the of your morning getting Cheryl your great thank each over to on I quarter and Thank and us on you the morning

time Cheryl, and For with: have I would the it's steak you eat great day out fame con. have to Star Trek signing great Chris. calls, Captain as leave Kirk will at said: Ruth's the these a go the And of last off you

Cheryl Henry

Thanks, Mike.

Operator

This your for concludes gentlemen. ladies today's call. you participation, and Thank

You may now disconnect.

Ruths Hospitality (RUTH) 10 Aug 182018 Q2 Earnings call transcript