RUTH - Earnings call transcript Q4 2020 | Ruths Hospitality Group Inc

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today’s Ruth’s Hospitality Group Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Kristy Chipman, Chief Financial Officer. ahead. go Please

Kristy Chipman

and Shamali everyone. Thank good you, morning

me President and the today call our Henry, Cheryl is Chief Joining on Executive Officer.

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

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

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

Cheryl Henry

office franchise of in during continuously our fourth everyone. team year, field agility call during fourth amazing Thank XXXX uncertainty, everyone and and our the shutdowns in We good the and for and Ruth’s first team morning face most on our a significant Chris challenging our and truly managed quarter two partners, the strong you the Despite and was quarter. both franchisees. late you, March staying our us challenges, safe results. these resulting today. resilience other Kristy home joining that hope healthy. through our displayed We in Thank the is in recently in the and year for

that and the on we that the on approaching the restrictions a horizon, cautious side While to possibility eased business other are of like the touch on is I of observations and still of business late. impact we feels us. would it remain briefly our our of as said, With the few with worst vaccinated population a behind

and First, driven We the our brand built is in diners. special this believe trust occasion business is over to because XX due we largely just by being have currently the years.

to their beginning. trust as the health with most we guests number Our made our dining and us that make experiences and their safety the priority have one of from

outside be, customer blurred as Second, our want they and that’s to buckets social distanced. of where more are business pre-COVID whether before restaurants, or meeting are in than that’s our from the okay, in we new our safely rooms dining

we talked guest demand and mainly and Finally, adjusted past, regional the consumer in about more mindset context of week. experience in of Today, we the have accordingly. seasonality nuances demand in about is also the day have

For example, X decline with sales but of dining XX.X% restaurants first a restricted restaurant the of our XXXX. open, comparable weeks rooms through posted

year California, sales followed. the weather open Florida, consumer and same available, has performed capacity, month prior XX% When almost and February. ready, we an In at off-premise patios during there demand allows at opened decline. XX% now However, which experienced of is with the of XX% the

bit the I quarter about a share recent financials will to growth. status want our fourth talk through walk Kristy in and a most While you moment, on operating more

restaurants XX at closed. managed company and As are temporarily we look today, remain X restaurants the open restaurant portfolio

XX.X% in restricted January, restaurants improving into down comparable These capacity We and to sales with XX.X% go-service restaurants have XXXX. XX when compared only. down December February, contributed have to operating open of sequentially is

is compared since our open dining performance XXXX. the March. reopening in rooms This dining sales to XX.X% As company-owned shutdown rooms after in comparable late I with mentioned, sustained for best restaurants decreased open

announce Florida that New Aventura, for to year restaurant Jersey third to our and of a we recovery Chris open House evolving Short new and Ruth’s a the the With we begin liquidity new quarter in Steak mid-XXXX will Hills, in a am opening. expect happy early of solid this I in position, construction

look ensuring we focus, we future. ahead, includes sure are change external making are for same we planning looking at the maintaining keeping a the prepared while we and are As towards time dual environment will should focusing This again, a efficiencies our the experience, XXXX strong agile, the maintaining and balance leveraging of liquidity. ready it teams sheet to and the ample specifics Kristy over quarter. learnings to on I from guest now in turn the with cover the

Kristy Chipman

Cheryl. you, Thank

GAAP $XX.X we XXXX. million the related of or Net tax $X.X payroll income loss quarter reduced share $X.X a stock ended income $X.XX or operating per employee reported also to included which net of income tax December roughly million accelerated an expenses. per diluted fourth fourth quarter $XXX,XXX $X.XX retention impairment income XX, related the in million diluted It to for credit, of For to XXXX, impact and approximate the compared items. expense and $XXX,XXX included discrete expense, a $X.X in severance tax million restaurants share

diluted quarter $XXX.X in revenues the share quarter prior the were for $XX.X $X.XX XXXX. in compared $XX.X million of Company-owned restaurant period. sales million non-GAAP were was million million compared $X.XX these XXXX. to Total Excluding earnings adjustments, in compared to per to the $XXX fourth

a from versus the compared Franchise in-restaurant the negatively quarter and when decrease income franchised/owned income under offered the by was during sales quarter fourth fourth COVID limited have XX.X% for company’s quarter This lower in operating $X.X decrease sales XXX,XXX XXXX of from XX.X% off-premise in the fourth impact restaurants in XXXX. $X.X entrees leading management comparable in the offered averaged the November tightening capacity, million, COVID-XX negative and the a COVID-related same renewed in restrictions. April dining as of weekly negative during of from restaurant comp offered lower the as to was to and December, negative end million outdoor to-go trends derived card Other as checks last XX.X% the largely quarter, agreements. Comparable due sales dining. XX.X%. included Traffic year. XX.X% measured decreased primarily October, quarter as breakage October, a month Restaurants XX in operating opened X well fourth restrictions to progressed. quarter to compared income of by our X.X% that only down sales of delivery due the from X mining by income XX.X% locations checks of XX XX,XXX as sales the sequentially improved down only. and service decrease quarter, of impacted and was While rooms to related to to decreased seating our quarter gift decreases unit

were $X.X $X.X food resulted deleverage million that expenses the down offset expenses basis such to earlier, and Turning the operating payroll XX.X% costs and a related retention to for noted to million percentage beverage by the costs, resulted points restaurant Restaurant and X% decreased and This fixed of due that of points as advertising of expenses, to and to percentage XX I operating credit XXXX. XX.X% reorders. beef from Marketing as from to-go sales a higher employee the primarily rent quarter insurance quarter. primarily compared in restaurant decreased basis operating as that XX sales costs deflation to fourth quarter to was the sales XX%. group

sales particularly continue be labor. reopen to dining focused leverage, sharply regaining rooms, our on we in we As our

For restaurants into last opened hours had year during were we compared to that built labor model. labor the fewer quarter, efficiencies to our

to However, to-go-only were offset that sales restricted by this operating a was leverage model. restaurants in

$X recording all labor accrual model home our from benefit compared due the of the team the see members. to to quarter million across XXXX, bonus to improve sales as fourth office expenses to increased expect for G&A the timing We of reopen million and the $XX.X restaurants largely portfolio.

debt at the million, of strong secured In As of the February additional of facility and million our down end revolving quarter, the XXXX. paid Cheryl million to the our of line end we net an credit extension cash through net on $XX.X of an fourth our $XX over financial. million fourth in down company from quarter, a debt XXXX. and credit mentioned, had $XX maintaining At position $XX.X

net amendment provides from into to we certain amendment XXXX. we Our relief $XX filing provides has million credit which X-K covenants capital the facility, This by of expenditures financial improved quarter, year. for XXXX. a reduction XX, commitment fiscal Subsequent us also It end quarter sixth senior in fourth fiscal an for entered first $XX XXXX. while for limiting on April January debt the our million in the XXXX since of on detailed a approximately the

that reason, Cheryl? experience wanted additional and Before coming to business quarters. won’t back over am guidance providing I sure volatility be Cheryl, will to conditions this That we I said, time. reiterate confidence the turn choppiness I for the normalize at the And call month-to-month. some in as just any we our

Cheryl Henry

Thank you, Kristy.

I has mentioned XXXX. stronger started off XXXX of As earlier, months the than final

on focused anticipating are guests, we such, understanding ready being As operationally. demand our and

of of capacity by lines followed business well months, As meeting as today time, utilization about with we I that, type questions. more the but by iconic missed take team population flexible experience in the we at increased business best about as open up guests. adoption recovery are they COVID believe not travelers. efforts, procedures by may return flexibility partners will on us milestones, vaccinated an of behind events, occasions the these a we innovation, With much future. franchise in with model, the their operating and and are for local optimistic the starts as and line our guests only where the and desire. includes taught transition and an new the and as and dining celebratory today, members With they proud group of brand demand, us labor with better then level over social technology, further and a organization but as we This has we our business restaurant XX-year-old time which mentioned, ready are

Operator

Inc. [Operator James proceed Please Instructions] first your is question from Rutherford questions. with Stephens from Our

James Rutherford

nice get with to year with for a you impressive. of will the get think of wanted this that as the $XX a ability about, all restaurants business million the vaccinations good occasions Well, inhibit or to that negative additional Do year I sort maybe end that that how could restaurants you pickup, helping maybe potentially to pre-COVID that to quite really get open off-premise bit really progress to you as level, back, dine-in, kind that that result, Cheryl, your start quarter-to-date doing for I say, you headwinds we of and possible this is that back little It’s sales are take it making. let’s all appreciate dine-in talked on the well? AUV, see thanks of the result does towards time – to comparable morning. detail. think to

Cheryl Henry

question. the for thanks Yes,

coming further us. people in as that we choosing that of there to we think has of everyone are have [indiscernible] there is that research back occasion and – guests demand. with see and are how a will safe yet seen business, is elements been we a that pent-up is – a business back been in talking And not the guests believe restaurants. there there dine whether I the go around the our are they bit own recovery have about couple conducting our think folks feel a that this I diner and done special and The is to piece I still it’s guest it, feeling, certainly through read come around or of and business we come

– the there guest in to Having when And elements been It’s still different the that, so in is as a as not of couple business see that. folks significant restaurants. I pre-COVID. said just will has we the survey that a we restaurant, it mention are

get mentioned, about do restaurants these been They have as our still And local markets, traveling see of folks so business as out their to we as waves, years and program will are back not demand of them XX they for local They their And you you vaccination are into business the communities. more in have the we in those many a plus local markets clientele. there. that kind – be believe reaches communities. the and think coming in

the business, we we is that help think that you would some second the our still buckets think there recovery, believe trends. be And I can but wave to the that business demand is offset across be of of later of going traveler. on if will point still again, the a your that to negative in

James Rutherford

of the status. the to think flipping of impressed cost given But the that, then And of you operating do And point restaurant great. on volume, those of you how benefit lower I much. future, the we what can That’s as fourth you side of in margins here level that was level much controls units? Thank of unit time? closing the profit expect top margin restaurant disruption by cost kind quarter, margin of to restaurant in a expect sort from at of about benefit X P&L, terms kind remind especially lot very normal in you

Cheryl Henry

question. Great

have to folks put organization the acknowledge job we the managing restaurants, through new I efforts, QX, the the So, have with working tools systems you as operators to and that. in in amazing the we them and that the P&L first the through have and manage mentioned the given all of done have the in place new

that. a an but That’s have they they trend, able have amazing just done So hold two it, call to quarters been to job. on been,

closed. I basis about the think well question your around turn margin. points it’s go was will X forward more I that And labor we Kristy the the to restaurants closing, and maintaining the detailed efficiencies of to As as the as in for over it XXX

Kristy Chipman

Yes. Cheryl. Thanks, Right.

bit We really can are to status built of part to closed It’s on not you gets the apart higher our into peel which as give because where it now, and operating that that has states. expect, prepared November I again, difficult right a of efficiency can wage you California model in certain look particularly it. tell can simply and restaurants little labor efficiencies what the one of was December like. guidance of – overall

benefit a being closed. of of that somewhat saw we So, because

us the months, we of but next be year with the some the labor savings as will that over couple new labor teasing in do expect stay that remainder we implement for apart we of to So model.

James Rutherford

Thanks Alright. very much.

Operator

from Nicole your with Please question And proceed Miller with Sandler. our is Piper next question.

Nicole Miller

good you update. the Thank and and morning thanks for

Just two questions.

development. around is first The

bit thinking and an the So up store little this where corporate specifically am the for some prior pandemic, that just development opportunity East create acquisitions, Did attached, stores so the there might like was until there understand robust that’s Could year. for Maybe and we a or that have so it a high gap? you LOIs long talk can year I pipeline? you. store level accelerate? longer a the Coast, how term, how more to on a great pause understand or are opened leases pandemic Thank we next

Cheryl Henry

Sure.

them X about talked X announced the leases – into the and today. we pandemic of So so yes, going had we we X of

acquisition We some Long territory in the to specific Jersey Island, was Pennsylvania, really in opening the Marsha of July Brown are about the ‘XX area. of up the market in New

two have do currently in we market. so that And leases

those as We process are construction with landlords. as has our pipeline working in our and those they to play pushed, in are timeline been of but of development and the initial far desire units. still part the add additional of Obviously,

the with couple we’re there again, And others, working the moving are landlords not at is others, think our the through that those as as details one we looking part and of be pipeline through that years. So, development forward the will about next of still we the with well. on location we are

Nicole Miller

then Okay, more team, second and is the the around business than anything. great. industry about when team professionals I question last And your and think it’s and

deploying the how the many are and So same now how individuals is pattern have And based how sales Where then today? being previously that were are or that are that called you’re that hire, there you differently to individuals you improving? going? things do back seeing the on reopening of

Cheryl Henry

Yes.

some and So closing we’ve then obviously stores around had choppiness again. opening

open you the outside know, dining dining. inside California, is not as number So shifted. but now has

we’re there home through and generally of expect at smaller in teams this markets. pre-COVID XX% about stay bit At the So to the year. office, levels those are a

at or channel. of announcing as work – things of we we’re the was was types sitting different we in which the functions different of business the As look of and delivery the one some to-go doing January Ruth’s launch Anywhere, around XXXX, digital really our about talked

by COVID. clearly been that’s so And accelerated

we during still line, resource back possible. we those might to changes especially quickly endeavor restaurant business of And so channel, restaurants are people that at as deploy We when folks been now have open, furlough. that new two our remain about be are temporarily worthwhile against against the some that that that’s you But happening on level. are think as how Generally new resources the pulling COVID. and closed, restaurants are speaking, do that the

Nicole Miller

Thank you.

Cheryl Henry

Thanks, Nicole.

Operator

Our next with Raymond question with your is from Vaccaro Please Brian James. proceed question.

Brian Vaccaro

I I but and Thanks appreciate the were was gave. in Certainly in and company-owned morning. it, good trends disclosures comp set missed though weekly quarter-to-date you if AWS And quarter as curious the could what volumes well? the fourth help you see where average to sorry level February? improving sales quarter-to-date were encouraging

Cheryl Henry

I’ll second weekly and started on mid-XXs volume, more about one as X so were, unit So get into first weeks, perspective. are unit we from to – February, volume numbers take the but average we we the the average an XX,XXX through average, seeing in

fourth far in was the release, As which detailed as is yes. XX,XXX, about quarter

Brian Vaccaro

Okay.

weeks, – you dine-in sure talking make I mid-XXs. for you’re the said, Because said were the numbers. sorry, just Is the So that X in what, you February, about those down, to through know – the we’re only? XX%. units want I same dine-in seeing

Cheryl Henry

the was restaurants of average status. of No. That all regardless

Brian Vaccaro

Okay.

weekly mid-XXs sales? in company February So average

Cheryl Henry

Right.

quarter, started month you mid-XX move yes. the – that to towards the progress I throughout month. throughout level, the it I’m mean As sorry, throughout

Brian Vaccaro

exit Okay, or for okay. Was rate average month? the is that that the an

Cheryl Henry

about Yes. It post-Valentine. was

So mark to that the we’re of in mid-XXs X growing. closer weeks last the month

Brian Vaccaro

it. it. Got Got

great. Okay,

the units. the you same appreciate you. Thank if have operating for system, company I you do handy? on it perfect. the update the Okay, status Could franchise for

Cheryl Henry

because you I As grab – have have to end. the handy think end that of don’t for for the we’re I to that going

things dining operating open it. to we – so units they have you XX just mentioned our one of QX, rooms get – versus But if the the Brian, QX XX. at end of is So for

was So you then through quarter. they is many the thrilled And closures, That the... do didn’t the X which actually I’m them. as have fourth have well, update, for great weeks

Kristy Chipman

I don’t have it here.

Cheryl Henry

We’ll that for get you.

Kristy Chipman

for that get you. We’ll

Brian Vaccaro

reasons. maybe sure. little it’s you expectations also I that Okay. But it what bit. guess, of ‘XX the We about on know lumpy help on Any something, be can for terms COGS about your expect a for thinking dynamic that And for in was ballpark – I us But we XXs not know inflation us I follow-up and the for outlook year? environment. ballpark a low can line are we’re talking the through G&A. would should G&A? ‘XX on through or it, call obvious in help quarter-to-quarter great. guidance,

Kristy Chipman

Yes.

So it starting But from to give it look we it that with the this on. – not probably given a your the perspective, really if to G&A difficult I – at would that’s go-forward can you you a sales information on at basis, with XXXX. exceed in point, overall, percentage time. point what’s of think best expect it’s look going we at from just uncertainty And expect to

Brian Vaccaro

Okay.

Kristy Chipman

be land But rest far on that’s somewhere and looking bit the year. perspective, for a we to at goods of about cost on and full the labor, the on overall sold little tell overall the a probably of can As of still looking the to you and impact business, X goods efficiencies X.X already inflation. talked from area between cost as we’re food one what will there I we’re

Brian Vaccaro

pass on. it I Thanks. will Alright. Perfect.

Cheryl Henry

Thanks, Brian.

Operator

proceed is your next with King Brooks question Associates. & question. with Todd from [Operator Instructions] Please Our CL

Todd Brooks

capacity-constrained typically? at the allow learned holiday guess, and more in morning in to to holiday and were of I back fashion. these able the you the Cheryl, looking you I get restaurants I both. period have a you areas to I have what One out is do good you accommodate looking will if about dining period, more this boxes the forward may few periods, peak be certain through how take a flex questions to you a just Hey, what running here, we it know November, customers. at that doing December, differently, productivity just private may. units

Cheryl Henry

Yes.

big a done prior work big I big the to So one layout of has capacity COVID, for utilizing capacity been actually of footprint, the this recently the was our utilization we’re of us. boxes. been we’d around table size. areas actually And has opportunity of And in the opportunity a – – mentioned each how

built our of XX% all guest is if and around tops we So inefficiencies your in two tops, demand for utilization. four you’ve have

work so boxes reset to the done throughout plans the we have XXXX in seeding and the And restaurants.

want space And think our that so learning going we was start forward. the of I around how

part separation again, the capacity, the started and was As had which, dining COVID for something – designing private our XX% we isolated space serve a to in had I in flexing X-foot something additional we rooms, were dining space we will going hit, XX% XX% that or didn’t capacity, yet felt well of able a the building, the our as main restaurants la us so and private but believe rooms feel the forward. implement that and carte was

carte So to if you us open space efficient being very for la an more can and restaurant. in experience are up that to more a the specified for turn a occasion, be able use utilizing through get it

some learnings. are those general So the of

this mindset. is think I – demand based and some is on consumer also it of

we’re into more have day now them their the schedules So guest of day? they in And flexible. still built has earlier be eat comfortable allowed in or desire feel flexibility to or or the out the later Does COVID. to work coming

look some great we’ll so adjust to And question. continue that is understand It’s how But to a need learnings demand. and at we there. to it definitely to continue there

Todd Brooks

happen of the items post-holiday here gone those period, guess, streamlined a more we have on it capacity-constrained then going the going come Thank stick first b), that did a that quarter, menu try if going to the I likely that did know in back drive the or Very ticket. restaurants now higher-ticket to some helpful. there parts fiscal you. to at more second to higher ‘XX? unique of follow-up, menu to a), the items did least happen, back and premium I menu be average to plan, a holidays, And for a knowing was were into fourth were into

Cheryl Henry

Yes.

our we actually given the a room holiday – that program consumer menu dining to So said, here? okay. that relation mentioned, menu. that back. we remain the guests. we results believe see And in was our found into part in you as in potential we and in an cut on the QX. And It’s the and They did recovery quarter bone-in we season. check something throughout streamlined, of saw QX, Where the offering is we our and And for the that is important our demand for we

So we do them. plan with to move forward

Todd Brooks

Okay, as kind share that’s your have that thoughts for getting capture? great. incremental ‘XX you to you. really there? seats on And and looking out through that be capture as you finally, and closed? go in we’re do budget could go And industry play is Thank far how to then sets, after And out now competitive the of what holiday be to at how and had may the competitive fiscal share that going and fine bias your Ruth’s market sense what’s survivor dining

Cheryl Henry

let to opportunity think the me potentially restaurants. is I closing the what Look, idea – speak around of quantifying

I yet. played think has out not that fully

have restaurants that being looks now reopened. capacity of is here, what say is in – been see I traveled the is being that coast we’ve for in and based And like. we’re I because X different things understanding and are – the can of that different the months think seen that have to restraints, up regional areas inability there I closed down kind And what – happening Florida. which

that there there a that exactly think strong I appreciate so don’t to we’re is is, And I opportunity while yet. what desire quantify

to I the help think and some of more there aid the is coming smaller independents chains.

to determined. still to pre-COVID to why are said guests we be market our staying think we XX Anywhere our that always have, and are I it’s share share. to offerings, expanded years sure building Ruth’s for we over looking and so And market make the relevant time, that’s that, yet Having gain launched pre-COVID

to So we’ll on focus continue that.

we opportunities think I about there thing spend and lot that learned our one data. of we’ve marketing area efficiencies say to and about have opportunity, in if a is

think We that to e-mails. And X.X% have see database our answer marketing to that forward. spend opportunity as down just and we trend some leverage has you around I X been million we have will spend. cutback marketing X.X%. And think X.X%, out And of a we directly that, pre-COVID, an to we coming are going about

And it. look so we’ll at

utilize we understanding We continue We’ll now, to is as are needed. and look going, in where it the hanging range. right out consumer at But demand that it. pent-up

Todd Brooks

you. Thank helpful. Very

Operator

question And James your with Stephens our next Rutherford is from proceed with question. Inc. Please

James Rutherford

thanks. Hey,

you rates guests wanted do immediately, probably hop question, that? to thought to if decide? and led importantly, are want XXX% have Texas one states I given there for with And how just your as how pick And you back today? to is vaccination open in it capacity dine-in the to the capacity most Just handle and walking more what’s comfortable to average flip don’t operators Florida your to clearly, as but become up that you restaurants a towards incrementally want more up could, plan handle do as that slowly like capacity

Cheryl Henry

have we Yes. That’s question internally. the

and believe ability base. So driving in capacity, trust guest I’ll say this, XX%. frequency at we that stayed We for it’s when Florida

worked So for that us. well has

three to keep given more I but the the set feel of up then right balance. sales and extent this people or guests vaccinated business tables, safe think incremental looking things need and and more start along we’re let incremental some restrictions available continue the that looking forward. changes what as, and going evolve haven’t now, of safety, two make Again, two lead states to again, the in I when to become understanding because case, we out, we’ll that and But obviously, with add as people do at at – more yet. to think capacity we’re kind we you it’s health we’ll a do going loosen it. way,

to conducting we’re more there’ll so still so come on be that. that And and balance,

James Rutherford

handle. Yes, Have a certainly the to delicate Thanks thing that so much. great day.

Operator

we And the Cheryl Henry of session. over closing I will the for now turn end to the question-and-answer reached remarks. call have

Cheryl Henry

speaking to much us so all you look you joining forward with soon. this for Thank I all again morning.

Operator

your conference you This concludes at for time. this disconnect and Thank today’s your participation. may you lines

Ruths Hospitality (RUTH) 5 Mar 212020 Q4 Earnings call transcript