Financial Overview — May 2008
Lake Mary, FL. — Ruth's Chris Steak House - Profit drops 33% at Ruth's
First-quarter results for the steakhouse called 'disappointing' but not surprising.
The economic slowdown is taking a big bite out of Ruth's Chris Steak House.
The Lake Mary-based restaurant operator reported late Tuesday a 33 percent drop in first-quarter profit because of slowing sales and an insurance claim benefit that pushed up results a year ago. The downbeat earnings announcement comes less than two weeks after the company's dismissal of Craig Miller as chairman and chief executive officer.
Ruth's Chris earned $4.5 million, or 19 cents a diluted share for the quarter ended March 30, compared with $6.8 million, or 29 cents a diluted share, for the first quarter of 2007. For its first quarter a year ago, Ruth's Chris reported an insurance-proceed benefit of $2.4 million, or 7 cents a diluted share, from a claim related to Hurricane Katrina.
First-quarter earnings matched Wall Street's expectations. More troubling, however, was the performance of Ruth's Chris-owned establishments open for at least a year. Those restaurants posted at 6.9 percent decrease in sales, compared to a 1.9 percent increase for the first quarter of 2007.
Bob Vincent, Ruth's Chris chief financial officer, called the sales results "disappointing" in a conference call with investors, but he indicated they were not surprising since the trends were consistent with the restaurant's sales at the end of last year.
Diners who visited Ruth's Chris for special occasions have been coming back less frequently, Vincent said in the call, adding that restaurants in Florida and California were suffering worse than those in other parts of the U.S.
Ruth's Chris first-quarter sales totaled $98.6 million, an increase of 21 percent over the $81.5 million for the same period a year ago. Sales were helped by new restaurant openings and the acquisition of Mitchell's Fish Market restaurants in February.
To boost business, the company said it would start advertising fixed-price menu specials to appeal to consumers looking for less-expensive dining options. In what Chief Operating Officer Geoffrey Stiles called an "uncharacteristic" move, Ruth's Chris has hired a New York ad agency to run the promotions throughout the country.
"We just need to re-energize our traffic," Stiles said in the conference call.
Looking forward, Ruth's Chris said it continues to expect earnings for fiscal 2008 to be between 55 cents a diluted share and 60 cents a diluted share.
Ruth's Chris shares fell 2 cents to $7.97 in after-hours trading. During regular trading, shares dipped 6 cents to close at $7.99.- LOUISVILLE, Ky. — PAPA JOHN´S INTERNATIONAL INC. reported a 34–percent plunge in first-quarter net income on a $5.2 million after–tax loss related to its franchisee–owned cheese purchasing company. For the three months ended March 30, Papa John´s net income was $8.6 million, or 30 cents per share, versus $13.1 million, or 43 cents a share, a year earlier. Excluding the impact of the cheese purchasing arm, per–share earnings would have been 48 cents, the company said. Revenue increased almost 11 percent to 289 million for the quarter on strong sales at both corporate and franchised units, Papa John´s said. Domestic systemwide same–store sales increased 1.7 percent, including a 2.6–percent increase at company stores and a 1.4–percent bump at franchised locations. As record–high commodity rices, especially for wheat and cheese, continue to challenge operators, Papa John´s said it was on track to meet its previously stated earnings forecast for the full year, in the range of $1.68 to $1.76 per share. The Louisville–based company and its franchisees operate 3,238 Papa John´s Pizza restaurants worldwide, including 2,770 in the United States.
- MIAMI — BURGER KING HOLDINGS INC. said three–private–equity stakeholders were selling a combined 15 million shares of the company´s common stock. Funds controlled by TPG CAPITAL, BAIN CAPITAL PARTNERS and the GOLDMAN SACHS FUNDS currently own about 58 million shares, or about 43 percent, of Burger King´s stock. After the sale, their combined stake will shrink to 31.6 percent. Burger King would not sell any shares in the offering, which is being underwritten by Goldman, Sachs & Co. Burger King´s stock fell 2.58 percent in trading Tuesday to close at $27.65. The Miami–based company and its franchisees operate 11,400 BK units worldwide.
- OAKVILLE, Ontario — Citing bad weather and an earlier Easter, bakery–cafe chain TIM HORTONS INC. reported first–quarter results below analysts´ expectations. For the three months ended March 30, the company´s net income was $61.8 million Canadian (US$60.5 million), or 33 cents a share, compared with $59.3 million Canadian (US$51.4 million), or 31 cents a share, a year ago. Analysts on average were reported to have expected earnings of 36 cents a share. Revenue rose 8.4 percent to $460.3 million Canadian (US$450.4 million), reflecting a 9.9–percent increase from Canadian units and a 7.05–percent dip from U.S. units. Same–store sales at Canadian units rose 3.5 percent year–over–year for the quarter, while U.S. samestore sales rose 1 percent. Tim Hortons and its franchisees operate 2,839 units in Canada and 399 in the United States.
ANN ARBOR, Mich. — DOMINO´S PIZZA INC. reported a 68–percent surge in first–quarter net profit to $14.1 million, or 23 cents per share, for the three months ended March 23, versus $8.4 million, or 13 cents per share, a year earlier. Excluding increased interest expense from a 2007 recapitalization, Domino´s pershare earnings would have been 21 cents, down from 38 cents a year ago, the company said. U.S. systemwide same–store sales fell 5.2 percent, but rose 8.8 percent at international branches. Corporate revenue dipped to $339.0 million, from $339.3 million a year earlier, restrained by “continued challenges in the domestic environment,” Domino´s said. The company and its franchisees operate 8,641 outlets, including 5,128 U.S. branches.- SPARTANBURG, S.C. — Buoyed by property divestments, DENNY´S CORP. reported first–quarter net income of $5 million, versus $1.2 million a year earlier, on revenues of $196 million, down 17 percent from $236.7 million in the prior first quarter. Per–share earnings for the three months ended March 26 were 5 cents, versus 1 cent a year earlier. Same–store sales rose 0.7 percent at company units, reflecting a 5.7–percent jump in the average guest check and a 4.7–percent traffic decline. Same–store sales for franchised units slipped 0.9 percent. Denny´s attributed its higher profit to an ongoing restructuring plan, which included the sale of 21 restaurants during the quarter to four franchisees. The company and its franchisees operate 1,550 restaurants.
- GLENDALE, Calif. — Expenses from the acquisition of APPLEBEE´S — not the economy — were blamed by IHOP CORP. Monday for its 24–percent decline in first–quarter profit, although the company also said the macroeconomic climate may hinder a plan to sell corporate Applebee´s units to franchisees. For first quarter ended March 31, IHOP´s net income available to common stockholders was $8.6 million, or 50 cents per share, down from $11.3 million, or 63 cents per share, a year earlier. Officials said the decrease was primarily due to a $48.4 million increase in interest expense related to IHOP´s financing for the $2 billion purchase of Applebee´s last November. Also contributing to the profit drop were an increase of $31.5 million in costs associated with running Applebee´s and dividends on preferred stock issued to finance the deal. Corporate revenue for the franchisor or operator of 1,353 IHOP restaurants and 1,986 Applebee´s increased to $442.8 million for the quarter, from $90.1 million a year earlier. Quarterly same–store sales for the IHOP chain rose 3.7 percent as Applebee´s saw its first same–store sales growth in two years, a 0.5–percent increase.
- SEATTLE — Describing the current economic environment as the weakest faced by STARBUCKS CORP. in its history, the company Wednesday projected a year–to–year decline in second–quarter earnings and cut its profit forecast for the full year. For the quarter ended March 30, the coffeehouse giant now expects to earn 15 cents per share, down from year–ago earnings of 19 cents per share. The quarter´s net result would include charges of 3 cents per share stemming from Starbucks´ closures of some 100 branches and the implementation of menu and customer service changes that started in January, when chairman HOWARD SCHULTZ returned as chief executive to address declining same–store guest traffic. Starbucks said its total revenue in the latest quarter should increase 12 percent.
- SCOTTSDALE, Ariz. — P.F. CHANG´S CHINA BISTRO INC. said Wednesday its first–quarter net income slipped 7.8 percent from a year ago as higher costs offset increased revenue at both its 177–unit namesake chain and its 155–unit PEI WEI ASIAN DINER fast–casual brand. The company also reported that the pending sale of its lone TANEKO JAPANESE TAVERN had fallen through, but did not divulge the reason. P.F. Chang´s said in January that it had reached an agreement to sell a majority stake in Taneko, a concept patterned after the neighborhood izakaya taverns of Japan, to a management–led group that included FOOD, FRIENDS & CO., the operating company of well–known Texas restaurateur JACK BAUM. P.F. Chang´s latest quarterly net income declined to $9.6 million from $10.5 million in the same period last year.
- OAK BROOK, Ill. — MCDONALD´S CORP. reported its first decline in monthly U.S. same–store sales in five years Tuesday, marring the company´s otherwise strong first–quarter earnings report, including a 24–percent surge in profit on strong overseas sales. The 0.8–percent year–to–year drop in domestic same–store sales was for March, signaling a fall–off in volumes as the quarter progressed, but still leaving a 2.9–percent overall jump in U.S. same–store sales for the quarter. That gain included same–store increases of 1.9 percent in January and 8.3 percent in February. McDonald´s net income for the quarter was $946.1 million, or 81 cents per share, versus $762.4 million, or 62 cents per share, a year earlier. Revenue rose 6 percent to $5.61 billion. The company reported double–digit growth in revenue and operating income from its European and Asia–Pacific/Middle East/Africa regions.
- LOUISVILLE, Ky. — YUM! BRANDS INC. reported a 31–percent surge in first–quarter profit as double–digit growth in sales overseas, especially in China, offset softness in Yum´s domestic operations. In the United States, Yum´s TACO BELL, PIZZA HUT, KFC and A&W brands were still hurt by increased cost pressures and slow sales. U.S. operating profit declined 5 percent year–to–year for the quarter, ended March 22. Yum said commodities costs rose by $25 million from a year earlier. Corporate restaurants posted a 2–percent drop in sales. However, U.S. systemwide same–store sales for all Yum´s brands increased 3 percent, versus a decline of 3 percent a year ago. First–quarter net income was $254 million, or 50 cents a share, up from $194 million, or 35 cents a share, for last year´s first quarter. Systemwide revenue grew to $2.4 billion, from $2.2 billion a year earlier. The results beat a consensus forecast of analysts polled by Thomson Financial that Yum would earn 40 cents per share on revenue of $2.35 billion.
- DALLAS — Chili´s Grill & Bar parent BRINKER INTERNATIONAL INC. on Tuesday posted a $38.8 million net loss for its March 26–ended third quarter, versus a year–earlier profit of $54.6 million, because of charges and losses from the for–sale Romano´s Macaroni Grill chain. Brinker´s per–share loss was 38 cents, versus earnings per share of 43 cents a year earlier. Excluding special items and the discontinued operations of 224–unit Macaroni Grill, Brinker earned $33.7 million, or 33 cents per share, down from $46.5 million, or 37 cents per share, a year ago. However, results beat analysts´ expectations by 1 cent, according to Thomson Financial. Revenue for the quarter slipped 3.9 percent to $907.7 million as blended same–store sales rose 1.1 percent, including a gain of 1.6 percent at Chili´s and dips of 1.8 percent at On the Border and 0.4 percent at Maggiano´s Little Italy. The positive blended result was driven by a 3.1–percent year–to–year price increase, indicating negative trends in customer traffic at the
- MARYVILLE, Tenn. — RUBY TUESDAY INC. said Thursday it had agreed with its bankers and note holders on new terms for its credit facility, but did not specify the changes. The casual–dining company said it would need “several weeks” to finalize the new agreements, which were necessary because the operator had expected to break its debt–to–earnings covenant, causing a technical default. Ruby Tuesday´s debt totaled about $590 million as of Dec. 4, and it reported declining sales and profit throughout 2007.
- WINSTON–SALEM, N.C. — KRISPY KREME DOUGHNUTS INC. reported deeper net losses for its Feb. 3–ended fourth quarter and full year, compared with year–earlier results. The operator or franchisor of 449 doughnut shops blamed increased charges for closed units and decreased sales for the loss of $31.8 million, or 50 cents per share, for the 14–week quarter, versus $24.4 million, or 39 cents per share, for the 13–week period a year earlier. Revenue fell 1.2 percent to $110.9 million. Excluding revenue from the extra week, revenues decreased 8.2 percent to $102.9 million, the company said. Its net loss for the year was $67.1 million, or $1.05 per share, versus $42.2 million, or 68 cents per share, for the prior year.
- OAK BROOK, Ill. — A survey of 32 domestic MCDONALD´S franchisees operating about 241 restaurants indicated that they would score year–to–year increases in same–store sales for March and April of less than 1 percent — the lowest results in the threeyear history of the study by independent stock analyst MARK KALINOWSKI. He said the franchisees´ aggregate same–store sales forecasts have been within 1 percentage point of McDonald´s actual same–store results for 22 of the past 31 surveys. Kalinowski said the surveyed franchisees reported an aggregate same–store increase of 0.9 percent for March and expect to post a collective 0.8–percent uptick for April. McDonald´s plans to release its March same–store sales figures with its first–quarter results April 22; April sales figures would follow next month.
- WASHINGTON — Year–to–year food inflation outpaced the overall rate of retail inflation for March as the government´s monthly CONSUMER PRICE INDEX rose 0.9 percent from its February level before seasonal adjustment, and was up 4.0 percent from March 2007, the Labor Department reported Wednesday. The prices consumers paid for food and beverage items rose 4.4 percent in March compared with year–ago levels, including a 4.7–percent rise for food at home and a 4.1–percent jump for food away from home. By comparison, consumers´ expenditures on housing rose 3 percent last month, versus yearearlier results, as fuels and utilities climbed 6.5 percent and gasoline was up 26 percent. On a seasonally adjusted basis, all consumer items gauged by the CPI rose this year from February to March by 0.3 percent as food increased 0.2 percent, including a 0.3–percent increase in food away from home. On Tuesday, the department´s monthly Producer Price Index report indicated that record spikes in food and energy drove domestic wholesale prices for March to their second–largest one–month increase in 33 years.
- SPARTANBURG, S.C. — DENNY´S CORP. reported a 0.4–percent drop in systemwide same–store sales for the first quarter ended March 26 as declining traffic offset the chain´s increased average check. Denny´s and its franchisees operate the largest family–dining system, with 373 corporate locations and 1,177 franchised restaurants. First–quarter same–store sales increased 0.7 percent at corporate restaurants, the company said, reflecting a 4.7–percent year–to–year decline in guest counts and a 5.7–percent year–to–year jump in check averages. Franchised restaurants reported a same–store sales decrease of 0.9 percent. During the quarter, Denny´s opened one corporate restaurant and sold 21 units to franchisees, while franchisees opened nine units and closed five locations, the company said. Denny´s said it expects to report full first–quarter results on April 29.
- GLENDALE, Calif. — IHOP CORP., parent to the IHOP family–dining and the APPLEBEE´S casual–dining brands, said Thursday that same–store sales rose at both chains for the first quarter ended March 31, driven by limited–time offers and menu price increases. However, the company reported that guest traffic at IHOP remained flat from a year ago and continued to decline at Applebee´s. For the first quarter of the year, systemwide same–store sales rose 3.7 percent at IHOP and rose 0.5 percent at Applebee´s domestic locations. It was Applebee´s first positive quarterly same–store sales result in two years, the company said. The IHOP chain includes about 1,353 locations, and Applebee´s has 1,986 locations. IHOP said it would release full first–quarter results on April 28.
- WINSTON–SALEM, N.C. — KRISPY KREME DOUGHNUTS INC. said it has secured with its lenders more relaxed credit facility covenants, but that interest rates would rise on both its $76.1 million term loan and $20.3 million outstanding letters of credit. The amendments were not outlined, but Krispy Kreme said the interest rate on its term loan will increase 2 percentage points to LIBOR plus 5.50 percent. LIBOR is the London interbank offer rate, or the rate at which banks borrow funds from each other. It is typically used as a benchmark for short–term lending rates. Fees on the company´s letters of credit also rose 2 percentage points to 5.75 percent, the company reported. Krispy Kreme, which operates or franchises 449 locations, said last week it would seek amendments to its credit arrangements because they were scheduled to become “more stringent” during the company´s fiscal 2009, which is in progress. As of Feb. 3, which marked the end of the company´s fiscal 2008, Krispy Kreme was in compliance with all financial covenants, it said. The company expects to file its annual report on April 17.
- CINCINNATI — FRISCH´S RESTAURANTS INC., operator or licensor of 117 FRISCH´S BIG BOY restaurants and franchisee of 35 GOLDEN CORRAL units, reported a 7.9–percent increase in its third–quarter profit and cited a slight sales increase and improved cost management as profit drivers. For the quarter ended March 4, net income was $2.1 million, or 40 cents per share, versus a year–earlier profit of $1.9 million, or 37 cents per share. Revenue rose 1.8 percent to $66.6 million. Same–store sales at Frisch´s Big Boy restaurants fell 0.5 percent for the quarter but rose 0.2 percent at the company´s Golden Corral units. That increase by Frisch´s Golden Corral arm marked only the second quarter in the past 18 that the franchisee´s grill–buffet outlets have a posted positive same–store result.
- SCOTTSDALE, Ariz. — The board of KONA GRILL INC., parent of the 18–unit grill and sushi bar brand, has approved the repurchase of up to 600,000 shares, or about 9 percent of the company´s common stock. Kona Grill had about 6.6 million shares outstanding. No time frame was given for the repurchases, which the company said would be made on the open market. News of the buyback plan sent Kona´s stock up more than 11 percent in trading Tuesday. MARCUS E. JUNDT, the Scottsdale–based company´s chief executive and president, said the buyback plan “represents the board´s confidence in our company´s future.” Its firstquarter financial results are scheduled to be released April 30.
- LOS ANGELES — CALIFORNIA PIZZA KITCHEN INC. has upped its first–quarter earnings forecast based what it said was a 10.2–percent increase in revenue, better–than–expected same–store sales and operating efficiencies. CPK now expects that its scheduled May 8 quarterly report will show per–share earnings of 7 cents to 8 cents for the quarter ended March 30, up from expectations of 4 cents to 6 cents stated in February, when the company also forecast that same–store sales could fall 1 percent. CPK on Tuesday said same–store sales for the quarter rose 0.4 percent. That compares with the year–earlier growth of 4.7 percent for the same period. CPK said revenues increased to $164.7 million, from $149.4 million for the same period last year. California Pizza Kitchen and its franchisees operate 237 restaurants. However, CPK´s stock slipped in trading Tuesday after an analyst noted that 45.5 percent of its restaurants are in economically struggling California and Florida.