Ruth's Hospitality Group (RUTH) Tops Q3 EPS by 5c

Ruth's Hospitality Group (NASDAQ: RUTH) reported Q3 EPS of $0.15, $0.05 better than the analyst estimate of $0.10. Revenue for the quarter came in at $1.03 million versus the consensus estimate of $102.75 million.

Highlights for the third quarter of 2019 were as follows:

• Total revenues in the third quarter of 2019 increased 4.0% to $103.0 million compared to $99.0 million in the third quarter of 2018.
• Net income in the third quarter of 2019 increased 25.7% to $4.5 million, or $0.16 per diluted share, compared to net income of $3.6 million, or $0.12 per diluted share, in the third quarter of 2018.

Net income in the third quarter of 2019 included $0.3 million in acquisition-related expenses associated with the acquisition of the three restaurants from our Philadelphia and Long Island franchisee, and a $0.3 million income tax benefit related to the impact of discrete income tax items. Net income in the third quarter of 2018 included $0.4 million in acquisition-related expenses associated with the acquisition of the six restaurants of our Hawaiian franchisee, as well as a $0.1 million income tax benefit related to the impact of discrete income tax items.

Excluding these adjustments, as well as the results from discontinued operations, non-GAAP diluted earnings per common share were $0.15 in the third quarter of 2019, compared to $0.13 in the third quarter of 2018. The Company believes that non-GAAP diluted earnings per common share provides a useful alternative measure of financial performance to improve comparability of diluted earnings per common share between periods. Investors are advised to see the attached Reconciliation of Non-GAAP Financial Measure table for additional information.

• During the third quarter of 2019, the Company completed the acquisition of three franchised restaurants with two in the Philadelphia, PA area and one on Long Island, NY as well as development rights for this territory.
• The Company returned $17.3 million through dividends and share repurchases during the third quarter of 2019.

Cheryl Henry, President and Chief Executive Officer of Ruth\'s Hospitality Group, Inc., stated, “I’m pleased with the strength of our third quarter results including a comp sales increase of 0.6% and pro-forma earnings per share of $0.15. I’m particularly proud of the commitment to excellence from our team and our franchise partners, who through their execution delivered these achievements in spite of weather-related headwinds and a 19% increase in beef costs during the quarter.”

Henry added, “During the quarter, we continued to strengthen our development pipeline with new leases for Company-owned restaurants in Long Beach, CA and another in Suffolk County on Long Island, NY. In addition to these investments, we announced a new $60 million share repurchase authorization, which reflects our commitment to delivering on our total return strategy for our shareholders.”

Financial Outlook

Based on current information and the aforementioned franchise acquisition, Ruth's Hospitality Group, Inc. is revising its full year 2019 outlook based on a 52-week year ending December 29, 2019, as follows:

• Food and beverage costs of 28.5% to 29.0% of restaurant sales,
• Restaurant operating expenses of 48.5% to 49.0% of restaurant sales,
• Marketing and advertising costs of 3.3% to 3.5% of total revenue,
• General and administrative expenses of $34.5 million to $35.5 million, inclusive of integration costs related to the acquired franchise restaurants in Philadelphia and Long Island,
• Pre-opening costs of $2.0 million to $2.2 million,
• Effective tax rate of 17% to 19%,
• Capital expenditures of $54 million to $56 million, which contributes to depreciation expense of $21.0 million to $22.0 million,
• Fully diluted shares outstanding of 29.4 million to 29.6 million (exclusive of any future share repurchases under the Company's share repurchase program.)

For earnings history and earnings-related data on Ruth's Hospitality Group (RUTH) click here.

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