In more proof that red-meat hysteria hasn't fazed the American diner, steakhouse operator Rare Hospitality
It's not the name Rare Hospitality that diners make their pit stops for. The company's marquees read LongHorn Steakhouse, Capital Grille, and Bugaboo Creek Steak House. Rare's venues compete with another popular steak hotspot, Outback Steakhouse
Why the big yawn from investors? Maybe it's that the news isn't too shocking, since most red meat-related restaurants have been disclosing a lack of mad cow impact on their business. Also, the guidance is raised just a penny -- Rare said that it now expects fourth-quarter earnings of $0.32-$0.33 per share, as opposed to its old expectation of $0.31 to $0.32 a share. It said it now expects earnings of $1.20 to $1.21 for the year.
Maybe the real good news was that the company's December same-store sales were higher than expected, despite the mad cow controversy late in the month. Its Capital Grille restaurant sales flew a healthy 12.6% higher. The LongHorn chain enjoyed sales 5.3% higher, and Bugaboo increased 3.4%.
If the ongoing mad cow issue does take a turn for the worst, steakhouses are safer than other restaurants with menus based on beef. According to scientists, chowing down on steaks, roasts, and muscle cuts is okay, since it's ground beef that is the culprit for giving people the disease (and of course, going into too much detail here could be enough to ruin some appetites).
Furthermore, it's pretty commonly recognized by analysts and investors that falling beef prices resulting from the disease represent rising profits to companies like Rare and Outback, especially if the same number of diners (or more) queue up for tables. Despite some of the bad press, sizzling times for steaks seem bound to continue.
Is Rare Hospitality a stock you could sink your teeth into? Strike up a conversation with other Fools on the Food message board.
Alyce Lomax welcomes your feedback at [email protected].
