RUTH - Earnings call transcript Q2 2019 | 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 2019 Second Quarter 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 being today’s reminder, a call recorded. is As

turn over Financial to would and now Taylor, conference to like sir. ahead of I Mark the Vice Please go Analysis. Planning President

Mark Taylor

everyone. Annette, you, and morning Thank good

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

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

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

in a adjusted find reconciliation You can release earnings our per of for share press call. today’s

now like over to Henry. our the would to I call Cheryl turn Chief Executive Officer,

Cheryl Henry

results reported $X.XX that all quarter thank of Thank we restaurant joining sales us included for per you, second the negative. and were on today. Mark. you morning, comparable morning, Good call This diluted with everyone, slightly share that earnings

the improve sales pleased sales to While comp we results slowly, June. positive including comparable were the quarter’s in quarter, throughout started out see

Manhattan despite Metairie slightly flat running storm blackout the are from New Orleans, and comps July, in closure recent to Barry. challenges tropical up, and from Lafayette in Now, in

with year-over-year a of results, also Father’s continued improved our always, and are commitment to also acquisition Mother’s in April, the consistently cash Easter soft foundation investing opportunistic of we flows in our which of return combined business after the function enables franchisees. is we the in to shareholders our as occasion including and long-term generate, Day. quarter, That the and restaurants to These a operational of new while capital the growth steady excellence, commitment, throughout saw core those special business, development success. Our us Day team’s

With regard York, development New Jersey. on closed territory the contains This close earlier we’re the have three pleased a announced of million the to area, Island, Long acquisition last point, the this prized of eight to parts to week previously franchise New population restaurants, of and Philadelphia very plus rights people. to

per pleased family restaurants We’re and the new solidify company-owned our this three our territory long-term to into help of five corporate team Chris new also Ruth’s will members us strategy that believe to development welcome year.

have year, of which terms we to Massachusetts, development Somerville, In Ohio, and this restaurants open for signed are expected the second leases in in D.C., half. Columbus, for Washington all

and the Worcester, two a solid signing for restaurants Jersey Short Hills, new up year XXXX. in leases We Massachusetts. recent announced also we Yesterday, have of New for shaping

along We to restaurant expect of half restaurants Oklahoma these in in two which previously XXXX, with new second announced. the was open City, a

provide opportunities late as XXXX quarterly into to and additional for work continue we’ll on We occur. and actively they XXXX, continue on signings to lease updates

day. each work on innovation. creativity by like focused the franchisees, dedication brand. generated be and of they opportunities continue this and the for to to remainder These As XXXX with incredible beyond, team evolve the grow every opportunities and look thank iconic them, I’d along to to excellence, and and our we we are do our remarkable their to

to quarter that, With financial results. details turn over to our of second Arne I’ll it the review

Arne Haak

Cheryl. you, Thank

$X.XX we compared quarter per reported quarter $X.X of during For June to quarter income second million second or million net XXXX, share per or XX, diluted this included the benefit, $X.XX income associated in which mentioned. share, diluted of $X.X and our just year’s to with the related ended net income items, Net of in of a the XXXX. former discrete the $XXX,XXX acquisition $XX,XXX franchise expenses second income Cheryl impact tax of

expenses $XXX,XXX income of Net of the tax XXXX included quarter and second the in impact $XXX,XXX acquisition related income items franchisee. Hawaiian of our a to the benefit discrete with in associated

were as second $X.XX in Excluding of the the XXXX, operations, quarter as compared second earnings diluted results share well the quarter XXXX. from adjustments, these discontinued $X.XX non-GAAP per to in of

$XXX.X development, second partially to in X.X%. while million quarter entrees, million, in by a offset were compared Total measured as driven average $XXX increase the X.X% year, by Traffic company-owned during comparable The decreased was sales. X.X% to the by increased restaurant sales last XXXX. compared year-over-year quarter, restaurant for restaurant new check decrease

quarter point of a Company-owned into XXXX. basis shift sales tailwind XX comparable the restaurant XX traffic to of Easter and included basis second from the point

during improved quarter, most New geographical area. facing period mentioned, Cheryl sales the the comp challenges, despite in our As some York notably by

have area, In fact, second been this impact the quarter comp sales, would positive. from excluding trade

restaurants the was in up comparable domestic in in X.X%. sales quarter, compared restaurants Franchise the our were quarter million, Comparable second franchise sales $X.X income X.X% while increased XXXX. in million our international to during $X.X franchise

casino minimal of full operations. Oklahoma as This flooding located property, of River. loss our floor operating of the million at XXXX. of driven new by days the to Other by The and operating restaurant, $X.X $X.X result on suffered Nevada, a to hotel the Reno, a the damage, second back agreement compared in quarter second of was year-over-year and addition Tulsa, for a restaurant restaurant, in under the is increase offset Arkansas slightly XX management operating was a million income and

have been higher However, during $X.XX closed that restaurant the quarter. EPS would estimated not our we’ve had with the

as year-over-year second April, the increase. Now, half approximately decreased points a XX.X%. beef expenses, a turning basis quarter, the and costs resulting moderate the X% in costs, percentage a we After restaurant to spike of year-over-year of beverage our XX food to sales, in saw in

percentage points sales, XX labor basis restaurant costs. as higher approximately increased operating to a of Restaurant due XX.X% year-over-year to and occupancy expenses,

XX decreased points across This a percentage periods. approximately Marketing was costs, total the spend of X.X%. by basis and advertising of shift driven as to revenues, a change

expenses, percentage total X.X%. G&A approximately largely basis revenues, decrease year-over-year acquisition were costs XXXX. by was XX of to franchise the higher quarter driven as The down points of a in second

average of of Year-to-date, in $X $XX XXX,XXX repurchased outstanding, At end million had shares an second quarter, dividend, $X.XX September approximately dividend of debt XXXX. quarter at an share. we the increase the Board first $X.X Directors our per of represents we have for the million in the million up end XXXX. of $XX.XX the XX% price the quarter, per from quarterly second cash of paid approved Subsequent which of to the purchase share

our outlook for to prior and goods update guidance an provide to like reaffirm cost and all other sold I’d XXXX of points. Now,

and continue We third through the of the expected have seen to in beef balance year. inflation quarter currently the reaccelerate here

As quarter third to we third the in the quarterly as lows, calls, inflation a shared result, XX% we highest on second and higher with having quarter previous in expecting year, beef were last of this prices of the likely a we inflation. year, the multi-year decline experienced half in

up is in So beef be proving with certainly far quarter, to this costs to excess date. this of XX% true,

supply. our representing approximately period on total set previous entered down The into early from paid quarter, of negotiated entire of prices In X% the XX% will our during we year. XX% approximately contract beef XXXX, the pricing over in supply tenderloin August second price the be into XXXX

sales. to goods expect As a sold and full the we to cost to supply of restaurant to now result, our beef X% range average XX% the our be year total of for of X% XX.X% in

to other guidance last respect unchanged conference they affirmed. and call, earnings are from all With remain our points

Our this earnings press morning these details all things. release issued early of

for remarks. now back to the Cheryl like With closing that, turn I’d call to

Cheryl Henry

Arne. you, Thank

value our and total opportunistically organic our a excellence As iconic dividend repurchase and to strong This and into capital I XXXX back the half the to to allocation, growth, I’m building in investing acquiring about excited brands, shareholder including foundation remaining to of ongoing return operational XXXX, our look share strategy. and and grow creating smart evolve of committed franchisees program. includes opportunities upon

that, the to you like for questions to Annette call turn With may have. now I’d back any

Operator

your you. from Instructions] go Please [Operator from Inc. take Stephens first We’ll ahead. caller Slabaugh Thank Will

Will Slabaugh

thanks. Yes,

have you it could the in your quarter? you promotional the quarter? hoping of this way were – that you’re worked how year? what as would worked rest Maybe if didn’t any well about the thinking you in approaching been work how what broadly about well the little changes as strategy if think And a wondering either you’re Just or more or as talk it had

Cheryl Henry

Will. Thanks,

that mentioned spring So talked again and softness the shift weeks, about saw cetera. as call, we et and Easter with in where as around was Arne the previous on I the we at early just we really in think, quarter, look break some

kind from that. that And of standpoint, changes learn consumer of I behavior holidays, so those the don’t from around promotion to a there’s know anything impact

a I will the bar been further, say of traffic that that what of relation talked driving we about through the more seeing lot to past got we’ve for and into I the idea the in strong on the call trends the years. we program as know we’re saw we really quarter couple last briefly bars. were has our been

And different so we’re looking opportunities. at

to centers. quite that but yet with all around We’re not share revenue the prepared you,

la business And but come next the dining private probably so our on as think carte call, there. a to more business at I looking well as

Will Slabaugh

getting over from we’re debate season, quarters different that were circling behavior Got simultaneously core curious it. of been around, groups then the showing or customer helpful. past often given years? and your there’s issues into seeing was other any if talk That’s about And we’ve tariff any what I we

Cheryl Henry

that private based trends Easter of some Again, little we’ve of headlines. you I saw related some in market, in York but No. in generally think kind peel think line what then just with noise necessarily the on I over back the a you and shift to years are couple the not in last of the year, when see media Again, of the seen softness New this I fell segments. and those where we other a bit that think, dining

Will Slabaugh

you. Good to hear. Thank

Operator

Barish We’ll hear from next Andy from Jefferies.

Andy Barish

delved you’ve of York big little franchise sort given going the you’re one building into obviously, restaurants more the a if where acquisition? New and wondering to bit guys, more, market weakness Hey, start

Cheryl Henry

of that, those took around are individual – into plans have against Andy, deep looked what the kicked and – then each really we’ve have second the isolated and locations those off that impacting third there a We might in late restaurants be and quarter. dive

but softness seeing there, it’s improving it was. where still from We’re

Arne Haak

Andy, is this Arne.

– individual Manhattan, the that – is there it is is into I without has tourism. And think much think is getting softness. though I been the I area too mean, restaurants, the

in seeing dropping – is, while is as go rest York impact the from the lessens And out softer occupancy see than what still little bit. we’re you area You it’s Manhattan, New further. we hotel the a out as further go the of It country. still

So look but I think, is more cadence definitely out as the in it’s its where but the – good, we Brown’s weakness. it’s restaurant still slow, Garden it’s at city biggest seen the and of center we’ve around sales City, Marsha

Andy Barish

was or acquisition, New that Hills of is territory? Brown part Short not Marsha of the Northern And part Jersey

Cheryl Henry

was Yes, not. Andy, it company that a acquisition. to was prior the territory

Andy Barish

to – just And on guess, April, trying understand. finally Okay. on I then I’m just

Easter were spring were what expecting? there guess, just a not positive you shift So, volatility like positive, was the and and choppiness enough, lot it breaks I and of seemed or

Arne Haak

Andy, this is Arne.

was really choppy. it So,

Easter last call, around back itself. weeks, about good the seen we’ve remember it like, really was talked our bad seen on you and we’ve week weeks, If we

versus So, the was Sunday. a an improvement normal Easter holiday

And so the you benefit. that’s where get

down week week we if than we’ve of you all really did As at was Easter week, more Easter Easter had, it to week. look like like any

just kind approaching in you April you – X% of about if was sale adjust the would that it one so comp holiday X.X%, comp negative. sales It’s the decline X%. see And month, was that probably for

hadn’t to been XXXX. hurricanes you seen that Easter X%. That’s blip of one-month X.X% since would the have a shift, If like the had we like haven’t April down

And team, was against the did very great lot unusual it kind did really So, were sales I of I And in a our work. year of quarter. We it. ago toughest June about great, because The the positive of it a a was comp second April. job think, concerned was comp rallying. think we

as but normal, perspective, it – to some in an from April saw lot well. people choppiness think of industry So, looks are it’s like things back a I

Andy Barish

you. Thank

Operator

We’ll [Operator hear James. Raymond Brian from Instructions] Vaccaro from next

open. is line Your

Brian Vaccaro

on in that comps and think marketing back go that in do to you making impact just comps, negative a on the shift timing the that mentioned else? quarter second Thanks changes there. morning. a had good and to you’re the Is more you color or the Wanted and something tactics, mostly And little quarter?

Cheryl Henry

Brian. Thanks,

this really made. we was related investments So, to

year of making If and last to you tax research recall, we the of understanding and talked use into investments dollars consumer. the some related about some

And is you not there that and around, which impact. as was think, outs, your tactics, shift so would question was a really necessarily the media some I think

not So, to I that, related would say, specifically quarter. necessarily no, the in

Brian Vaccaro

the talked help and of I And the about up despite view the slightly you the that that get you storm us a quarter-to-date much comps then obviously, blackouts days. flat – extract we’re about XX Okay. of too of make some being and can one guess, curious, all take talking activity. underlying trends one-timers, but month results, to

any digits there? the can color you’re it that meaningful. be out Would or you low single in So, those you say if strip

Cheryl Henry

that would you think – single could I say low digits. yes,

Brian Vaccaro

a margins the to second. Okay. Shifting just gears for

X%, you year. your forecast said think, is for correct? seeing that to Is the So, X% think beef outlook, unchanged that’s food I versus up the on I Arne, cost prior

Arne Haak

correct, is That Brian.

has We the are parts. full two kind year – moving of

we filet the a the we to quarter reasons I little why think the committed lock in announced second below that one that’s of expectations was and it. our bit

third the down – in it’s digits the last XX% It’s year. in double but and We inflation currently quarter. expect an against here the

kind So, with a data. do I to mean. to of certainly you lot beef seeing work a you’re prices return this the of normal know the

So, you’re than in seeing as we’re inflation probably what the third seeing well. we thought. But here had more of kind it quarter

the two kind So, those filet out, of balance it benefit. offsets

quarter be year. should think a third going here. for quarter will normal, the to We it’s X% bit little fourth thinking the still be be choppy but we’re So, X%

Brian Vaccaro

year? is helpful. that’s overall food the for to inflation And put up total just thinking non-beef seeing or where X% see about maybe Okay, the you beef X% of the basket year, the terms outlook, in basket the for it if cost do

Arne Haak

like where X.X% Right now, to goes. I’d it’s beef on say, think probably depending we low-Xs

Brian Vaccaro

Okay.

meaning the correct? I’m on interpreting non-beef, So, right? overall are expect ex-beef, some deflation that you baskets, if you

Arne Haak

all minuses, see the there’s some we’ll – on we’re all come you It’s at that pluses – would Yes. us. but stuff, see and kinds going to benefit of other back

Brian Vaccaro

Okay.

great. Okay, in the that us remember remind then to Back tenderloin can XXXX? one last for when you early – And expires contract, me.

Arne Haak

February. of Middle

Brian Vaccaro

Perfect. Thank you.

Operator

Jaffray. We’ll move to next Joshua Piper Long from

Joshua Long

a some you do you Thank cost question. Wanted bit, see value taking or opportunity feel in with but year? good with the where either price little the Great. at menu back set-up to half my that that’s this to coming the at? initiated Is thought about you straight take having price at Is price some there how mix through point? for inflation visibility back basket, beef an the that even really

Cheryl Henry

Josh. Thanks, Yes.

So, the consistently calls, look we as price we before at mentioned through on year. fairly –

at this look yes, quarter, carrying are in about it. and continue We X.X to we’ll

the driving consumer I around think on menu, but menu, past the opportunities have Josh, to value gone, also move the buy where the we’ve so is in then allowing to continued the up. traffic of to offering offering focus

– be take price. direct the mix, point option your around we’ll So, there’s just to to

to I as some think have, a menu we still offset but well. option, of an throughout consumer that have and that the think move also there’s I

Joshua Long

in in the me And we’re of Great. that. Have I kind in helpful. – physical touchups remodels investing any That’s needed is year? you back of Can very remind terms appreciate do stores that in any the quarter? where to you you or the any the half do the of plans? at

Cheryl Henry

Yes.

about here another will. remaining completed seven addressable again, of in if year. this should be at there two-thirds So, for three through we about year, completely that system, for three end – puts And of are we And one completed quarter. talked the – the about we’ve us the were this you those, and year, the

Joshua Long

Got you much. so it, Thank great.

Cheryl Henry

Josh. Thanks,

Operator

the additional to comments. time, for would I closing over at are any like management turn conference to in there And this no callers the queue. back or additional

Cheryl Henry

Again, day. Have look a near on with us And future. thank you I this great all you to the morning. joining the for forward call in all speaking

Operator

you That does all conclude We your today’s teleconference. thank for participation.

Ruths Hospitality (RUTH) 2 Aug 192019 Q2 Earnings call transcript