Ruth’s Hospitality Group, Inc. reported unaudited financial results for its first quarter ended March 27 and announced a new $60 million share repurchase program and a quarterly cash dividend of $0.07 per share to be paid in the second quarter. 

Highlights for the first quarter of 2016 compared to the first quarter of 2015 were as follows: 

The company reported net income of $10.8 million, or $0.33 per diluted share, in the first quarter of 2016 compared to net income of $10.4 million, or $0.30 per diluted share, in the first quarter of 2015.

Income from continuing operations was $10.9 million, or $0.33 per diluted share, in the first quarter of 2016 compared to income from continuing operations of $10.8 million, or $0.31 per diluted share, in the first quarter of 2015.

Net income in the first quarter of 2016 included a non-recurring $0.2 million after-tax charge related to closure costs for our Columbus, Ohio, restaurant.

Total restaurant sales in the first quarter of 2016 increased 4.2 percent to $95.9 million compared to the first quarter of 2015.

Company-owned comparable restaurant sales increased 3.1 percent in the first quarter.

Michael P. O'Donnell, chairman, president and chief executive officer of Ruth's Hospitality Group, Inc., notes, “Our first-quarter results were highlighted by solid top-line growth and a favorable commodity environment. The quarter also included positive comparable sales and a return to positive traffic growth. Additionally, in keeping with our total return strategy, we are pleased to announce the recently approved $60 million share repurchase program. We believe that our ability to supplement organic growth initiatives with the consistent return of capital to shareholders is a testament to the strength and stability of our operations.”

Review of First Quarter 2016 Operating Results 

Total revenues in the first quarter of 2016 were $101.9 million, an increase of 4.7 percent compared to $97.3 million in the first quarter of 2015.

Company-owned Sales 

For the first quarter of 2016, company-owned comparable restaurant sales increased 3.1 percent, which consisted of a traffic increase of 0.9 percent combined with an average check increase of 2.2 percent.

Average unit weekly sales were $110.9 thousand in the first quarter of 2016, an increase of 2.6 percent compared to $108.1 thousand in the first quarter of 2015.

Sixty-six company-owned Ruth’s Chris Steak House restaurants were open at the end of the first quarter of 2016, the same number of company-owned Ruth’s Chris Steak House restaurants were open at the end of the first quarter of 2015. Total operating weeks for the first quarter of 2016 increased to 865 from 852 in the first quarter of 2015. Total operating weeks exclude discontinued operations.

Franchise Income 

Franchise income in the first quarter of 2016 was up 11.9 percent to $4.5 million compared to $4 million in the first quarter of 2015. The increase in franchise income was due primarily to new franchise restaurant openings during the last 12 months, a 0.8 percent increase in comparable franchise restaurant sales and fees related to the opening of our Jakarta, Indonesia restaurant in the first quarter of 2016.

Eighty franchisee-owned restaurants were open at the end of the first quarter of 2016 compared to 77 at the end of the prior year first quarter.

Operating income in the first quarter of 2016 increased 1.4 percent to $16.4 million, compared to $16.2 million in the first quarter of 2015. As a percentage of total revenues, operating margin decreased 52 basis points to 16.1 percent year-over-year.

Food and beverage costs, as a percentage of restaurant sales, decreased 87 basis points in the first quarter of 2016 to 29.6 percent, primarily driven by a 4.6 percent decline in total beef costs.

Restaurant operating expenses, as a percentage of restaurant sales, increased 49 basis points in the first quarter of 2016 to 45.8 percent, primarily due to increased labor costs.

Marketing and advertising, as a percentage of total revenues, increased 30 basis points in the first quarter of 2016 to 1.9 percent, primary attributable to a planned increase in advertising spend.

General and administrative expenses, as a percentage of total revenues, increased 90 basis points in the first quarter of 2016 to 7.5 percent, driven largely by a year over year increase in stock based compensation.

Share Repurchase Program

During the first quarter of 2016, the company repurchased 732,000 shares of common stock under the Company’s share repurchase program, for approximately $11.7 million or an average price of $15.92 per share.

On April 20, subsequent to the end of the first quarter, the company’s Board of Directors approved a new share repurchase program under which it has authorized the company to repurchase up to $60 million of its common shares outstanding. The new authorization replaces the company’s previous $50 million share repurchase program announced in October 2014, which has now been retired. Share repurchases may be made from time to time in the open market, through negotiated transactions or otherwise (including, without limitation, the use of Rule 10b5-1 plans), depending on share price, market conditions and other factors. The Company intends to continue to conduct any open market share repurchase activities in compliance with the safe harbor provisions of Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The share repurchase program does not obligate the company to repurchase any dollar amount or number of its common shares. 

At the end of the first quarter of 2016, the company had $8 million in debt outstanding under its senior credit facility.

Development Update

The company currently expects to open four new restaurants during 2016, including Albuquerque, New Mexico, in the second quarter; El Paso, Texas, in the third quarter; and Cleveland, and Waltham, Massachusetts, in the fourth quarter. As previously disclosed, the company closed its Columbus, Ohio, restaurant during the first quarter after 17 years in the marketplace due to changing marketplace dynamics.

Ruth’s Chris Steak House franchisees opened a restaurant in Jakarta, Indonesia, during the first quarter and have signed leases for two more new restaurant openings in 2016, with Odenton, Maryland, expected in the third quarter and Greenville, South Carolina, in the fourth quarter. This year, they also expect the relocation of two franchise locations. Philadelphia is currently scheduled for late in the second quarter while Huntsville, Alabama, is currently expected to occur in the fourth quarter. The relocation of the Mississauga, Canada, restaurant has now been moved to the first half of 2017.