Continued guest traffic challenges and investments in remodeling older restaurants impacted earnings for Ruby Tuesday Inc. in the first quarter ended Sept. 1, executives said Thursday.
Officials at the Maryville, Tenn.-based casual-dining operator told equities analysts in an earnings call that they were focused on new menu promotions, a refreshed look at the restaurants, and a shift in advertising media to stem some of the traffic trends.
“While we have made significant progress over the past two years, we expect more,” said James “JJ” Buettgen, Ruby Tuesday chairman, president and CEO.
Buettgen said menu promotions, such as a kids-eat-free Tuesday night offer, have enlivened the atmosphere in restaurants and helped bring back the family demographic. Ruby Tuesday tested the kids-eat-free promotion in the second half of last fiscal year and rolled it out nationwide in the first quarter.
“It is a one day a week program, but we are seeing continued momentum that is having a meaningful impact on Tuesday, and enough to impact the overall week in a noticeable way,” he said.
The company is also conducting a remodeling test in two restaurants.
“While it is too soon to share results, we are very encouraged by the early reads and we continue to make modifications based on guest feedback,” Buettgen said. “We will continue to refine several remodel packages and have identified sites for test at varying investment levels. These are expected to be in test in the back half for the fiscal year.”
The company expects to spend $34 million to $38 million to test the remodeling program, enhance the signature Garden Bar and catch up on deferred maintenance, Ruby Tuesday chief financial officer Jill Golden said. On Sept. 2, the chain launched five new Garden Bar Lunch Combos for under $10, and it plans further Garden Bar upgrades later in this quarter.
Ruby Tuesday is ready to begin testing Ziosk tabletop tablets in restaurants later this month, Buettgen added.
The company is evolving its communication and media strategies to include more digital components with the hiring of a new social media agency, he said.
“We've increased our focus on reaching families with kids using a wider range of digital and social media platforms, such as Facebook, Twitter and Instagram,” Buettgen said. “The intent to this partnership is to leverage social and digital media to build awareness and drive incremental guest counts amongst families with kids. We are also increasing our investment in digital and social platforms in the second quarter.”
The digital marketing allows the brand to pinpoint families with kids “with a lot less waste on the media” than cable television advertising, Buettgen said.
“We are excited about it,” he said. “It is early, but we are going to increase our efforts, and I would expect to see a shift more in that direction over time.”
On Thursday, Ruby Tuesday reported a net loss of $4.2 million, or 7 cents a share, in the first quarter, compared with a profit of $2.6 million, or 4 cents a share, in the same period a year ago.
Revenue in the quarter fell 0.6 percent, to $279.5 million, from $281.2 million in the prior-year period, which the company said was mostly due to a net reduction of 11 company-owned restaurants compared with the first quarter last year.
Same-store sales rose 0.6 percent at company-owned locations, mostly on increased check averages, but year-over-year guest counts declined 2.9 percent in the quarter. Executives said same-sales sales were positive in June and July, but August was negative with the shift of Labor Day into the company’s fiscal second quarter.
Ruby Tuesday owns and franchises the Ruby Tuesday and Lime Fresh brands. As of Sept. 1, it had 734 Ruby Tuesday restaurants in 44 states, 12 countries and Guam. It also had 27 Lime Fresh restaurants in six states and the District of Columbia.
Franchisees operate 78 Ruby Tuesday restaurants and eight Lime Fresh units.
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