Del Frisco’s shares fall as biggest stockholder will sell 5 million shares

Posted Tuesday, Jul. 16, 2013  comments  Print Reprints

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Shares in Southlake-based Del Frisco’s Restaurant Group sank nearly 6 percent Tuesday after a longtime private equity owner that is also the company’s largest shareholder said it plans to sell 5 million shares in the company.

The affiliate of Lone Star Funds will receive all proceeds from the transaction, called a secondary offering. Dallas-based Lone Star, a turnaround firm specializing in distressed securities and real estate led by John Grayken, bought Del Frisco’s parent company in December 2006.

When Del Frisco’s went public last year, Lone Star held about 18 million shares. It sold 4.9 million shares this spring, reducing its holdings to 13.1 million shares as of April 10, according to regulatory filings.

Shares of Del Frisco’s (ticker: DFRG) finished down $1.31, or 5.6 percent, at $21.28 on the Nasdaq stock market. Still the stock has performed well in the year since it debuted at $13 on July 27.

The stock dipped despite higher earnings reported Tuesday. Del Frisco’s Restaurant Group, which owns Del Frisco’s Double Eagle Steak House chain, earned $60.4 million, or 20 cents a share, up nearly 18 percent, beating Wall Street’s consensus estimate of $59 million, or 19 cents.

In a news release, the company updated its guidance for the 53-week fiscal year ending Dec. 31, saying it now expects that its restaurant-related bottom-line earnings — before interest, taxes, depreciation and amortization — to be between 23 percent and 23.4 percent of revenue, compared with 22.8 percent to 23.3 percent previously.

The company also foresees a rise in capital spending, up to $31 million to $33 million, from $27 million to $29 million, with the opening of five to six Del Frisco’s Grille stores. It previously planned to launch five. One is under construction in Southlake.

“We are very pleased that the efforts of our team produced a 2.5 percent increase in total comparable restaurant sales and we are very encouraged by the substantial traffic gains realized at both Del Frisco’s Double Eagle and Sullivan’s [Steakhouse],” CEO Mark S. Mednansky said. But while sales increased at Del Frisco’s, they dropped at Sullivan’s, the report said.

“Del Frisco’s Double Eagle continues to deliver solid results; Del Frisco’s Grille is on track with its development plan, while during the second quarter we began work on refreshing Sullivan’s with an emphasis on solidifying the brand as an affordable neighborhood steakhouse through the introduction of a fixed-price offering,” Mednansky said.

But he noted that operational inefficiencies at newer restaurants at Sullivan’s hurt margins. The group owns 35 restaurants in 19 states and Washington, D.C., including 10 Del Frisco’s, 19 Sullivan’s and six Del Frisco’s Grille restaurants.

Barry Shlachter, 817-390-7718 Twitter: @bshlachter

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