Ruth’s Hospitality Group, Inc. (RUTH), Del Frisco’s Restaurant Group Inc (DFRG): Treat Your Portfolio With a Little Sizzle

As Father’s Day came and went away, we were reminded of the great American steakhouse. It seems there’s no better place these days to celebrate an event than with a great steak. America’s love affair with red meat continues and this has benefited meat purveyors. As the global economic recovery continues, more people are opting to eat out and that is also benefiting the overall restaurant group. What I like about the steakhouse business is that consumers tend to splurge at these restaurants and margins on not only food are higher, but beverages as well.

The top-shelf steakhouse

Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) bills itself as the largest fine dining restaurant group in the world with almost 160 restaurants. The company is known for its Ruth’s Chris Steak House and Mitchell’s Fish Market, which was acquired in 2008. All of its steaks are USDA Prime and fresh seafood is flown into each location daily.

In the first quarter of this year, comparable stores sales at Ruth’s Chris grew 6.6% and 1.5% at Mitchell’s Fish Market. Operating income grew 22% and the company paid down debt of $32 million. The company initiated a quarterly dividend of $0.04 per share and a $30 million stock buyback program.

The growth for Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) is in continued restaurant expansion. The company has commitments for 19 future franchise restaurants in the next five years. There’s significant opportunity for the company in the fast growing regions of Asia and Latin America where income is rising and there’s an increase in demand for U.S. beef. In these regions, the beef is currently locally-sourced or like in Asia, imported from Australia. Diners preference is increasing towards the meat offered by Ruth’s Chris.

A rising competitor

Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG) owns and operates restaurants under the Del Frisco’s and Sullivan’s names. The company currently has 35 restaurants in 19 states. Its restaurants are geared towards high-end clientele like Ruth’s Chris.

For the first quarter of the year, revenue increased 13% to $59.8 million from $52.9 million a year ago. The company opened four Del Frisco’s Grilles and one Del Frisco Double Eagle restaurant. The company remains debt-free. The average check at a Del Frisco’s Double Eagle was $100, Sullivan’s $60, and Del Frisco Grille $50.