Whether they serve Mexican, Italian, seafood, or hamburgers, restaurants everywhere are struggling to show growth in this challenging economic environment. One notable exception showing a dizzying pocket of strength is the fine-dining steak business. When Bloomin' Brands (NASDAQ:BLMN) reported its third-quarter results, it joined the ranks of Del Frisco's Restaurant Group (NASDAQ:DFRG) and Ruth's Hospitality Group (NASDAQ:RUTH) in reporting knockout results for its recently completed quarter.
Bloomin' Brands reported third-quarter results on Nov. 5. Revenue was up 1.5% to $967.6 million, compared with the third quarter of 2012. Adjusted earnings per share was $0.10 compared to $0.07. Same-store sales across the company's four restaurant concepts showed an overall decline of 0.3%.
Bloomin' Brands owns Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse and Wine Bar. While the first three all saw declines of 0% to 2.7% in same-store sales, Fleming's Prime Steakhouse shined with a 4.2% increase. This was even better than the 3.8% increase in the second quarter.
Bloomin' Brands CEO Elizabeth Smith, like many others in the restaurant industry, noted that the summer was challenging for casual-dining which was why three of Bloomin' Brands' concepts showed poor same-store sales. For Fleming's Steakhouse, guest traffic was up 3.3% in addition to the 4.2% same-store sales growth at the concept. This means that not only were more people coming to Fleming's, but they spent more per person while they were there.
Fleming's Steakhouse actually performed even better than the numbers suggest. One of its restaurants had a delay in relocation which skewed the numbers. Ignoring this single restaurant, same-store sales were actually up 5.2% in the quarter.
CFO David J. Deno added some more direct commentary about Fleming's Steakhouse. He said,
One business that we don't talk enough about that's really, really, really doing well is Fleming's. And they had terrific same-store sales growth again this quarter. The business is doing very well across all measures, and it's a business that we would recommend to continue to get some attention as it continues to perform so well.
That is some confidence! Also, it is not unique to Fleming's.
Similar story with Del Frisco's Restaurant Group
Del Frisco's Restaurant Group owns and operates three restaurant concepts. Two of them are casual-dining concepts including one casual-dining steakhouse. Overall, its same-store sales fell by 0.2% for the third quarter. However, while its casual restaurants reported lower sales overall, its third concept, a fine-dining chain called Del Frisco's Double Eagle, saw a 4.4% rise in sales along with a 3.9% rise in traffic. It was the 15th quarter in a row of increasing same-store sales for Double Eagle. All of this is very similar to what's happening with Bloomin' Brands.
Ruth's Hospitality Group
Ruth's' Hospitality Group owns and operates two restaurant segments. One is the Ruth's Chris Steak House chain. The other is called Mitchell's Fish Market. Once again, the fine-dining steakhouse was the chain that shined. While Mitchell's saw a 1.4% decline in same-store sales for the third quarter, same-store sales at Ruth's Chris jumped 4.2%, the same as Del Frisco's Double Eagle. CEO Michael O'Donnell explained, "Our sales and traffic trends, which had been very encouraging for almost 4 years running and, of course, our bottom line performance, which has resulted in significant earnings growth since 2010."
Foolish final thoughts
Fine-dining steakhouses appear to be a bright spot in an overall weak dining industry. Look for Bloomin' Brands, Del Frisco, and Ruth's Hospitality Group to continue to grow their sales at their fine-dining steak restaurants. If the economy improves and lifts their more casual concepts as well, all three of these could prove to be big winners and warrant a closer look by Foolish investors.