Del Frisco’s profit comes up short, but outlook warms investors

Growing pains at Southlake-based Del Frisco’s Restaurant Group caused lower-than-expected fourth-quarter profits, but top executives say they have plans in place to improve results in 2015.

The operator of 46 steakhouses, including the young and fast-growing Del Frisco’s Grille, reported net income of $5.5 million, or 23 cents a share, compared to $4.6 million, or 19 cents, a year ago.

Revenues grew by 8.5 percent to $105.8 million, short of Wall Street’s consensus estimate of $110.1 million, according to Zacks Investment Research.

Del Frisco CEO Mark S. Mednansky attributed the earnings shortfall to overestimating results at its Grille chain — a more casual restaurant with a broader menu designed for a younger demographic — and declining sales at some units after their initial “honeymoon” opening period.

Mednansky said the company is taking a variety of actions to address performance at the Grille, including tinkering with the menu, speeding up service and boosting marketing. He said the company will continue to grow the concept, which has 16 locations, with plans to add six more this year. The company previously disclosed market research indicating there could be up to 170 potential sites for the Grille concept.

“The bottom line is that we have every confidence we will successfully address these near-term issues and they will in no way detract from our excitement in a Grille’s long-term potential,” Mednansky said during a conference call Friday.

Del Frisco’s shares (ticker: DFRG) responded to the outlook. Shares closed up 98 cents, or nearly 5 percent at $20.09.

For all of 2014, the company said net income totaled $16.6 million, up from $12.2 million in 2013, and revenues grew by 11 percent to $301.8 million.

The company’s core Double Eagle Steak House chain continues to perform well, posting same-store sales up nearly 5 percent in the quarter. During the conference call, Mednansky said the relocation of its Dallas steak house from north Dallas to a new Cesar Pelli development in the city’s Uptown district in 2016 is expected to generate $3 million to $4 million in sales in the first year.

This year, the company expects to open one Double Eagle Steak House and six Grilles. It projects earnings per diluted share should grow between 15 and 18 percent. Del Frisco’s operates 11 Double Eagle Steak Houses, 16 Del Frisco’s Grilles and 19 Sullivan’s steakhouses.

This article includes material from The Associated Press.

This story was originally published February 27, 2015 at 11:39 AM with the headline "Del Frisco’s profit comes up short, but outlook warms investors."