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Why Ruth's Hospitality Group Fell 13% Today

By Rich Duprey – Updated Jul 31, 2020 at 4:15PM

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The high-end steakhouse was late to the restaurant takeout and delivery game.

What happened

Shares of Ruth's Hospitality Group (RUTH 0.79%) tumbled just over 13% Friday after the owner of the high-end Ruth's Chris Steakhouse reported second-quarter earnings showing revenue missed analyst forecasts, though it managed to beat bottom-line estimates.

So what

Because Ruth's restaurants did not have much, if any, of a takeout or delivery operation in place until late into the pandemic -- an upscale restaurant is best experienced in the restaurant, not in plastic doggie trays -- sales collapsed during the crisis.

Couple eating in a restaurant

Image source: Getty Images.

Revenue plunged 74% to $28 million in the second quarter, a far cry from the $110 million it generated a year ago. Similarly, what had been a non-GAAP $0.31 per-share profit last year swung more than 180 degrees to a $0.48 per-share loss, albeit better than the $0.50 per-share loss Wall Street was expecting.

Now what

By the end of June, Ruth's Hospitality had reopened 71 of its 81 restaurants, or 88%, with 59 offering capacity-restricted seating, helping the high-end steakhouse accelerate sales growth for the month.

Where comparable sales had fallen 80% or more during the first two months of the quarter, the decline eased to 54% in June. And where average weekly sales per open restaurant had withered away to just $19,000 in April and over $30,000 in May, it doubled to $60,000 in June.

Despite improvements, Ruth's Hospitality expects to have a cash burn of $1 million per week in the third quarter.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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