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

Cheryl Henry: Yes. So as we’re thinking about — I think your first question was on capital investments. The $40 million to $50 million, we guided a little tighter, obviously, but on an ongoing basis, especially given the remodels and the refreshes that we’re doing, which are important to us. The paid media test is complete. And so, all of the costs associated with that are in the guide that you saw from a marketing perspective, all of the costs associated with launching that paid media program, based on the results of our tests are in that number already.

Andy Barish: Got it. And then, what about the — kind of, smallwares, menus, uniforms, stuff like that?

Cheryl Henry: Got it. Yes. So, obviously, built into our overall — I’m not going to give an exact dollar amount per restaurant, but it’s not overly significant. And I would say that, as you think about our other op, as a percentage of sales, which is where you would find some of the smallwares, will be relatively consistent on a percentage of restaurant sales perspective.

Andy Barish: Okay. And then, anything else kind of on Phase 2, I guess, Cheryl, that we should be looking for as the year goes on?

Cheryl Henry: Yes. So I’ll speak and I’ll turn it to Kristy. So, we’ve rolled out the idea of having our data transformation. There are several use cases that were coming forward. And the big one we’re focused on this year and I mentioned it in my comments, is around inventory and COGS. And I think, Kristy followed up on that. And we think, that’s an opportunity for us. We look forward to testing that throughout the year. That’s a big one for us this year. Getting the hospitality app, and now that it’s fully rolled in understanding how that could impact kind of top line, guest experience, guest palate, et cetera, is a big focus for us. And then again, the other — the rolling on Ruth reimagined a new bar menu for this year.

Kristy Chipman: Yes. And I’ll just add, as Cheryl mentioned that, at 25 basis points of improvement with the inventory. I think many of us believe that, that’s a very modest assumption, but we do need to do a detailed test for this. This is a very complicated change for our operators, and we want to make sure we take some of the learnings from the rollout of both our new POS and our labor management system and spend a little bit more time and test than we had originally planned, to get this right and make sure that we capture the greatest amount of savings in food by having this inventory system in place.

Andy Barish: Great. Appreciate the color. Thank you.

Operator: The next question is a follow-up from Brian Vaccaro with Raymond James. Please proceed.

Brian Vaccaro: All right. Thanks. So I just wanted to circle back on margins. And I guess on commodities, Kristy, I think you said that the non-beef basket was up 1% in the fourth quarter. I guess, how do you expect inflation on the non-beef basket to play out moving through 2023? I’m just wondering how much visibility via contracts in place you have on that non-beef basket?

Kristy Chipman: Yes. So, we expect it to be down about mid-single digits for the year, based upon those contracts that we have, some of our seafood, particularly, seafood products. Obviously, there’s still some exposure in areas like dairy that we have to offset. And based on the visibility we have, we do have local restaurant purchases in some areas, including produce. And so, we’ll have to see how all that shakes out. But based on the direct visibility that we have, down mid-single digits is what we’re planning for.