Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) Q4 2022 Earnings Call Transcript

Todd Brooks: Okay. Great. And a final one for me, and I’ll jump back in the queue. So you gave us some sensitivity around beef cost trends relative to EBITDA from a full year standpoint and prime, which looks like it €“ or beef, which looks like it was favorable in the fourth quarter into picked up here in January with what you talked about from a COGS standpoint. Can you talk €“ and is it possible to talk about full year outlook or beef yet or maybe the willingness of counterparties to contract at least that you get some of your needs locked in going forward to take €“ to put some stability around a cost level versus being at the at the whim of kind of how the market moves here.

A €“ Cheryl Henry: I can tell you, there’s been a lot of discussion around the always for us, but it’s even elevated amount of discussion most recently. January did pick up a little bit. I will tell you, February has come down from those highs. The reality of the situation with beef is the herd size is down and until we can bring that back up, which will take some time, we are going to see some challenges on beef. To your point about can we lock. We are always actively pursuing where we can lock portions of the basket, and we’re taking smaller loss wherever we can in addition to larger blocks where we can. But right now, we don’t have any significant lock on our beef right now.

Todd Brooks: Okay. Perfect. I’ll jump back in. Thanks.

Operator: The next question comes from Joshua Long with Stephens. Please proceed.

Q €“ Unidentified Analyst: This is Daniel Breen on for Joshua. Thank you for taking my questions. First, could you quantify the headwind from the Boston, Manhattan, and Hawaii markets this past quarter?

A €“ Cheryl Henry: Sure. The impact was about 480 basis points.

Q €“ Unidentified Analyst: Okay. Thank you. That’s helpful. And then on your proprietary demand platform, you talked about a 10% improvement in hours per entrée — translating that 200 bps of labor improvements. Do you think there’s any more incremental labor or COGS benefit do you think you could pull out from these initiatives and as we go into 2023, I think you cited around 105 bps of labor, if I heard that correctly.

A €“ Cheryl Henry: Yes. So I would tell you that the actual efficiency metric was beyond the 200 bps, but obviously, we had average rate increases and any managers back. And if you look back at the quarter, we started with significantly higher basis point improvement, but we have been adding managers back into the restaurants every quarter in order to protect the guest experience overall. From a go-forward basis, I think our opportunities are much more in the cost of goods line and food and beverage line than they are in the labor line. We obviously are experiencing like everybody changes in staffing, which requires more training costs, I think we are committed to keeping the efficiency in our hours per entrée going forward, the ones that we’ve captured already. But I do not see more coming in that particular area for us in the short run.

Q €“ Unidentified Analyst: Okay. Thank you. That’s helpful

Operator: The next question comes from Andy Barish with Jefferies. Please proceed.

Andy Barish: Okay. Good morning, everyone.

A €“ Cheryl Henry: Good morning.

A €“ Kristy Chipman: Good morning.

Andy Barish: Just wondering on some of the moving parts for 2023. I mean it sounds like there is going to be a significant amount of investments going on in experience in digital, paid media tests. Just kind of how you’re thinking about that as it rolls through the P&L and maybe the extra week is kind of an offset, just a couple of those factors. If you could provide a little bit more color, please?