Premium steak house operator Ruths Hospitality Group (NASDAQ: RUTH) stock is performing slightly better than the benchmark indices trading down (-13%) on the year. The operator of over 150 Company-owned and franchised Ruth’s Chris Steak House restaurants seems to be weathering margin compression in the dining industry. The fine dining segment tends to hold up margins better than fast casual restaurants as its patrons tend to absorb menu price hikes better. This was also indicated by competitor Darden Restaurants (NYSE: DRI) high-end fine dining establishments like The Capital Grille, and Eddie V’s Prime Seafood. To mitigate inflationary pressures, Ruth’s raised menu prices by 7%, which helped to improve margins. The Company saw 23% inflation for its food costs on average with outliers being eggs up 225% and butter at 69%. However, it did manage to experience a (-60bps) decline in food and beverage costs to 29.8% of revenues to better weather margin compression than fast casual establishments like Brinker (NYSE: EAT), Bloomin’ Brands (NASDAQ: BLMN), and Denny’s (NASDAQ: DENN).
MarketBeat.com - MarketBeat The USDA Prime and Choice grade steaks are grilled to perfection and served up on a 500 degree plate. Half of its sales are made up of beef. The price of the steak and seafood entree varies. The price for a bottle of wine is up to $1,000. In the year 2021, the dinner check was $90. 80% of the check was food sales. Volumes have returned to pre-COVID levels and comparable same store sales have increased. Ruth's opened two new restaurants in Massachusetts and California. Ruth's will open at least four to five new restaurants in each of the next two years. Each new restaurant is expected to bring in over $5 million in sales. The installation of its new booking and capacity data platform has improved demand forecasting and table management to drive comparative sales growth over the course of the year. Long-term investors will find it appealing that shares are trading well below their average 17X forward earnings at 12X forward earnings with a 1.54% dividend yield.
The rifle charts are used to gauge a medium term interpretation on the price action for shares of RUTH. The rifle chart bounced off thefib level. The weekly market structure low (MSL) was triggered by the weekly stochastic through the 20-band. The week peaked at the 70 band. The weekly 5-period moving average is sloping down with a flat 15-period MA. The 15-period MA is at $19.52. As shares test the daily 50-period MA at $17.94, the daily rifle chart is nearing a potential inverse pup breakdown. The daily 15-period MA is moving in the opposite direction. A cross down will cause the inverse pup breakdown. There are attractive levels at the $16.89 fib, $16.05, $15.19 fib, $14.44, $13.41, and the $12.38fib level.
Ruths released its fiscal second-quarter fiscal 2022 results on August 5th. The Company reported a non- GAAP earnings per share of $0.44. The revenue rose to $128.65 million, beating analyst estimates by $4.17 million. There was a loss no legal settlement and $8,000 income tax expenses related to the impact of income tax items in net income. Comparable restaurant sales increased over the course of the year. The cost of food and beverage fell. The total beef costs went down. The company decided to buy back $60 million of its shares and pay a quarterly dividend. In the quarter, the company paid down debt and bought back stock. "We were very pleased to deliver record performance for the quarter driven by strong demand from our guests." We generated double-digit comparable sales and solid margins, which resulted in adjusted earnings per share growth of 20% and 41%, respectively. The results are made possible by our world-class teams that serve the highest quality food.
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