Ruth’s Chris Steak House Inc. (RUTH) stated in an announcement last Thursday it expects a 40-plus percent increase in fourth-quarter sales. The increase will be primarily due to company-owned restaurant sales and because the comparable period last year was a week shorter.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_01_08_RuthChris.mp3
The company’s total revenue from operations, including franchise income, is likely to be around $84 million. Ruth’s Chris had revenues of $58 million in this period last year.
Same-store sales increased about 7.5 percent this year. The company attributes this to a 2 percent hike in entree growth and an average customer bill increase of over 5 percent.
Shares gained $0.12, or 0.62%, on Friday on 146% trading volume. Option trading was below normal volume at 34%.
CEO Appointed to Florida’s Tourism Commission In October:
Ruth’s Chris Steak House made an announcement in October that Florida’s former Governor, Jeb Bush, appointed the company’s CEO Craig Miller to the Florida Tourism Commission. Miller has been involved with the operation of Florida restaurants for over 25 years.
The CEO was quoted at the time as saying, “The addition of new Ruth’s Chris Steak House restaurants in Bonita Springs, Naples and Lake Mary within the next 3 months will bring our total to 14 in the state … the largest concentration of our restaurants in any one state and, notably, a presence in every region of Florida. Tourism is vital to the success of our business and the economy of the state. I look forward to working with the Governor and the Tourism Commission in helping to promote Florida and its hospitality and tourism business.”
Competitors:
Competitors for RUTH include: Morton’s Restaurant Group Inc. (MRT), Smith & Wollensky Restaurant Group Inc. (SWRG), and Palm Management Corp. (private).
Company Profile:
Ruth’s Chris Steak House restaurants offer food, beverages, and other services. As of December 4, 2006, the company had restaurants in roughly 100 locations worldwide. Ruth’s Chris Steak House was founded in 1965 and is headquartered in Heathrow, Florida.
Potential Trades:
| Covered Call – Ruth’s Chris Steak House Inc. (RUTH) $ 19.62 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
%Dnsd. Prot. |
%If Inch. |
%If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UUKBD | 07 FEB 20.00 | $0.65 | 3.30% | 3.40% | 5.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread — Ruth’s Chris Steak House Inc. (RUTH) $ 19.62 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
%Return | Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UUKBD | 07 FEB $20 | $0.65 | UUKBC | 07 FEB $15 | $4.80 | 20.50% | $19.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered call trade, an in the money covered call, offers 3.3% downside protection and a potential profit of 3.4% (43 days) if the stock remains unchanged. If the stock rises to or above its $20.00 strike price, the potential profit becomes 5.4%.
The second trade is a bull call debit spread. This trade offers 20.5% potential profit if the stock increases above $20.00. If the stock decreases below the break-even price of $19.15, the investment begins to lose money. If the stock price goes below the lower strike price of $15.00, the entire investment is lost. The net cost of this trade, per 100 options, is $415.00.
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[tags]Jeb Bush, CEO, Craig Miller, Florida Tourism Commission, Palm Management Corp., Heathrow, Florida, RUTH, Ruths Chris Steak House Inc., bull call debit spreads, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]