Darden absorbs Ruth’s Chris as other fine-dining restaurants slump a bit

Ruth’s Chris Steak House corporate staff should be settling into their new offices across town half a year after Olive Garden owner Darden Restaurants revealed it was buying the steak chain.

But at the same time, several other fine-dining brands have started to show some decline in sales compared with last year, which one analyst suggested could also happen at Darden’s newest restaurant.

“The fact that upper-end dining is tracking down … is certainly a risk that Ruth’s Chris could also track down after its acquisition into Darden,” said San Diego-based restaurant analyst John Gordon.

But Gordon said he believes Ruth’s Chris is solid, noting it attracts customers who eat there regularly or go for special occasions like birthdays as well as business meetings.

“Ruth’s Chris is diversified in terms of their revenue flow,” Gordon said. “There’s no structural risk of Ruth’s Chris crumbling.”

Darden finished its $715 million deal to buy Ruth’s Hospitality Group in June, after first revealing the purchase in May. Corporate staffers moved from the former Ruth’s headquarters in Winter Park to Darden’s Orlando Restaurant Support Center in October, spokesman Rich Jeffers said.

Darden is not including Ruth’s in its publicly reported same-restaurant sales until the chain has been with the company for 16 months, but other upper-end chains have started to report falling sales compared with last year.

Darden’s other fine-dining chains, Eddie V’s and The Capital Grille, reported same-restaurant sales declines in the last two quarters. They were down 2.8% in the quarter ending Aug. 27 and 1.9% in the quarter ending May 28.

Elsewhere, Fleming’s Prime Steakhouse & Wine Bar, owned by Tampa-based Bloomin’ Brands, reported that comparable restaurant sales at company-owned restaurants fell 4.1% in the quarter ending Sept. 24 and 2.5% for the quarter ending June 25.

And at the STK chain, owned by Denver-based The One Group, U.S. comparable restaurant sales fell 5.5% in the quarter ending Sept. 30 and 6.8% in the quarter ending June 30.

Darden executives have attributed the declining sales at their other fine-dining brands to comparing them with last year, when there was a resurgence of pent-up demand and exuberance from consumers coming out of the pandemic.

“We are seeing a little softness versus last year with household incomes above $125,000 and that primarily affects our fine-dining brands, but it does affect all of our brands,” CEO Rick Cardenas said on an earnings call in September.

In the May news release announcing Darden’s acquisition of Ruth’s, Cardenas called the chain a “great complement” to the company’s existing restaurants.

“That was more than six months ago,” Jeffers said in a recent email. “Today, we are even more excited to have them as part of Darden’s family of brands.”

Gordon said the Ruth’s Chris deal expanded Darden’s position in steak restaurants, but he doesn’t know if it will help them reach younger customers.

Darden has 1,998 restaurants, including Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s, and The Capital Burger.

Ruth’s Chris isn’t “targeted towards younger customers that want a new experiential concept that is fun to go into and is part of the new and different restaurant scene,” Gordon said.

“There are brands like that that were available. Certainly, Darden may have tried to acquire them, but for whatever reason, that didn’t happen, and Darden wound up with Ruth’s Chris, which is a solid steakhouse brand located across town.”

But the Ruth’s Chris deal doesn’t mean Darden won’t eventually add even another restaurant to the fold.

“This isn’t the end of it,” Gordon said.