Ruby Tuesday shares jump on '09 outlook

MARYVILLE Tenn. Shares of Ruby Tuesday Inc., the casual-dining operator, rose more than 25 percent in trading Thursday on fiscal 2009 guidance that topped Wall Street expectations. Expectations for an improved year came on the heels of a 43-percent plunge in fiscal 2008 fourth-quarter profit on continued slowed sales at the struggling chain.

The stock price surge was a large one-day gain for the company, which has lost about 42 percent of its stock value this year. Its 52-week high of $21.70 per share was hit a year ago, on July 11, 2007. It closed Thursday at $6.24, up nearly 18 percent from the day before.

Ruby Tuesday said earnings for the current fiscal 2009, which began last month, would total between 50 cents and 70 cents per share. According to Thomson Financial, the average analyst estimate was 51 cents a share.

The operator or franchisor of the 945-unit chain, which has been plagued by negative sales trends for more than a year, said same-store sales are expected to decline “at a rate in the low to mid-single digits” this year. For the May-ended fiscal 2008, same-store sales fell 9.8 percent at corporate restaurants and 7.6 percent at U.S.-based franchised locations.

For the June 3-ended fourth quarter, Ruby Tuesday's profit declined to $13.9 million, or 27 cents per share, from $24.7 million, or 46 cents per share, in the same quarter a year ago. Despite the significant earnings decline, the results were well above the average analyst expectation from Thomson Financial of earnings of 21 cents per share.

Fourth-quarter revenue fell 4.3 percent from a year earlier to $341.4 million. Same-store sales fell 10.3 percent at corporate Ruby Tuesday restaurants and fell 7.2 percent at domestic franchised locations, the company reported.

For the full fiscal year, net income fell 71.2 percent to $26.4 million, or 51 cents per share, compared with $91.7 million, or $1.59 per share, a year earlier. Latest-year revenue declined 3.5 percent to $1.36 billion.

“While we are clearly disappointed in our financial results for the year, we are encouraged by our operating trends,” Sandy Beall, chief executive, said in a statement. “Our average guest check and restaurant operating margins in the fourth quarter showed steady improvement and indicate that we are managing our food and labor costs and other aspects of our business more effectively in this difficult operating environment.”

The company said it expected restaurant operating margins to be lower in the current year because of higher labor and other operating costs. Management also said current purchasing agreements as well as certain cost-savings initiatives that it did not outline would lower year-to-year food costs.

Ruby Tuesday said it would open four corporate restaurants, including two that had been delayed from opening in the just-completed fiscal year. Officials acknowledged that 15 corporate locations would close this year because of lease expirations. Franchisees, both domestic and international, plan to open about 20 new restaurants, the company said.