Heard on the call: Ruby Tuesday

Chain posts best same-store sales in five years

Ruby Tuesday reported higher second-quarter profit and its best same-store sales result in five years, but the brand has no plans to declare its turnaround finished, chief executive Sandy Beall said.

Beall told investors during a conference call Wednesday that Ruby Tuesday’s brand repositioning efforts, cost controls and newly secured credit facility would enable it to move forward with its growth plans. The chain plans to reinvest future cash flow into new products and marketing campaigns for Ruby Tuesday and to grow by converting struggling locations to new concepts and by licensing agreements similar to one recently struck with fast-casual brand Lime Fresh Mexican Grill.

“We have found a good balance of sales traffic and profits,” Beall said, according to a transcript from SeekingAlpha.com. “We still need more profits. We need higher margins. We’re working on that. We have, I think, reasonable balance now. We continue to tightly control our cost and have low cap-ex needs.”

For the quarter ended Nov. 30, Ruby Tuesday’s net income was $4.6 million, or 7 cents per share, compared with $431,000, or 1 cent per share, a year earlier. Total revenues for the quarter grew 6.2 percent to $290.5 million, compared with $273.5 million a year earlier, reflecting same-store sales gains of 4.2 percent at corporate restaurants and 1.6 percent at domestic franchised units.

The Maryville, Tenn.-based company operates 676 Ruby Tuesday restaurants and franchises another 198 locations.

Diversifying through conversions

Converting underperforming corporate Ruby Tuesdays into different concepts will be central to the brand’s plans to grow and diversify in the near term, officials said. The company recently completed its first two conversions, opening a Jim ‘N Nick’s Bar-B-Q in Knoxville, Tenn., in September and upscale-casual Italian concept Truffles in Atlanta’s Buckhead neighborhood in December.

Ruby Tuesday also has turned to licensing agreements for a low-risk growth strategy, signing a pact in September to open about 200 units of Lime Fresh in a territory east of the Mississippi River excluding Lime Fresh’s home state of Florida.

“We open restaurants well, and we can run good restaurants, so it doesn’t matter whose brand it is,” Beall said. “It think we’re doing an outstanding job with Jim ‘N Nick’s and Truffles. I mean, that’s Houston’s-level quality all the way. So it is encouraging that I think we can operate multiple brands very, very efficiently with our great team.”

Ruby Tuesday also is developing a new seafood concept set to debut sometime this year.

Marketing makes a difference

Beall noted that improved marketing had a lot to do with the brand’s success, citing “game changer” offerings like a Tuesday night steak and lobster deal and a three-course Sunday Brunch. It also has started giving complimentary garlic-cheese biscuits to every table.

“When you start giving away $6 million worth of free bread, that has an impact on consumer satisfaction, some of our game changers,” Beall said. “We hope it is all of these thing that we’re doing that add up to something better.”

Ruby Tuesday also officials credited a more targeted marketing strategy with helping drive sales in the quarter, including advertisements on Facebook that garnered about 300,000 social-media fans, 15 percent of whom signed up for the brand’s So Connected e-mail loyalty club. Many coupon offers went to sports fans, providing discounted appetizers during college and pro football broadcasts on Ruby Tuesday’s upgraded TV packages.

New partnerships with consumer-insight firms Dunnhumby USA and Opera Solutions would help Ruby Tuesday further segment its audience for better one-to-one marketing, said Dan Dillon, senior vice president of brand development.

“Our efforts to better understand our consumers and to find better ways of marketing to them on a … more intimate basis is really what we’re doing with our partners,” Dillon said. “[We want to] better understand what their needs and wants are and to provide them with an incentive that makes more sense. It may not always be a coupon. It may just be the right product presented in the right way.”

Weathering a long December

Asked if bad weather along the East Coast in December hurt sales, and if improved holiday shopping siphoned off any discretionary dollars meant for restaurant spending, Beall said the brand had a “reasonably good” month.

“We are heading to the winter season, and who knows what January and February will bring, but we did survive December,” he said. “We did have a good gift card sales year, so that may be something positive, because most of it was bought in the restaurants. So I don’t think the thing where good retail sales pull from restaurants is necessarily true.”

Contact Mark Brandau at [email protected]