Skip navigation

Reeling restaurants aim for survival by driving guest traffic, paying debt

NEW YORK Ruby Tuesday Inc., a large casual-dining company, and Carrols Restaurant Group Inc., the largest Burger King franchisee, both said this month they would focus on just two initiatives: driving guest traffic and paying down corporate debt. —In a sign of the times,

Some analysts called the moves survival techniques. —In a sign of the times,

(To view financial charts featured in this week's print pages, click here.) —In a sign of the times,

Both companies have suffered from declining consumer visits—at Carrols the traffic drop is felt at the company’s two in-house chains, 89-unit Pollo Tropical and 153-unit Taco Cabana, and not at the 317 Burger King restaurants. Both companies also have loaded on leverage, to the tune of nearly $546 million at Ruby Tuesday and more than $300 million at Carrols. The combination has proved difficult to navigate. The companies cut their projected earnings guidance, and their stocks took severe hits, with both posting new multi-year lows. —In a sign of the times,

“These are difficult times for all,” said Sandy Beall, the founder, chairman and chief executive at Ruby Tuesday, parent to the 941-unit namesake chain. “With the weaker economy, housing crisis and high energy prices, consumers are thinking differently and spending less, as reflected in our and the industry’s sales.” —In a sign of the times,

Debt payments and a company’s total leverage have become major concerns for certain restaurant companies as they face declining cash because of slowed sales and increased costs. Analysts have noted, however, that both Ruby Tuesday and Carrols have options to increase liquidity, including real estate asset sales. —In a sign of the times,

Securities analyst Steven Rees at J.P. Morgan Securities Inc. believes Carrols may explore a partial sale of its Burger King business. Carrols, which has operated BK restaurants since 1976, did not raise that possibility when it outlined this month that it would explore additional sale-leaseback transactions and cut capital expenditures this year and next. —In a sign of the times,

Rees said options at Ruby Tuesday include the sale of owned land under about 330 corporate locations, as well as the closure of underperforming restaurants. In addition, Ruby Tuesday has enough free cash flow to pay down debt, and the company said it planned to do so by as much as $90 million. —In a sign of the times,

“We believe capital expenditure reductions, cost cutting, asset sales, and debt pay-down will allow survival,” Rees said in a note to investors. —In a sign of the times,

Neither company reported positive trends in their latest quarter. At Maryville, Tenn.-based Ruby Tuesday, net income for the first fiscal quarter ended Sept. 2 totaled $250,000, or 1 cent per share, its lowest quarterly profit since at least 1994, when public filings for the company began. While Ruby Tuesday had two instances of quarterly net losses, once during the last fiscal year and another in 1996, its quarterly profit since 1994 had rarely dipped below the $5 million mark and most often was in the tens of millions. For the first quarter a year ago, Ruby Tuesday earned $11.1 million, or 21 cents a share. —In a sign of the times,

Company officials highlighted the difficult environment in the South, where the majority of Ruby Tuesday’s units are located, because of gas shortages, hurricanes and a hard-hit housing market. —In a sign of the times,

While the chain has spent much of the past year remodeling restaurants and upgrading the brand in terms of menu offerings, service and facilities, macroeconomic headwinds have prevailed. First-quarter revenue fell 6.6 percent from a year earlier to $324 million. Same-store sales fell 10.8 percent at corporate restaurants and 7.9 percent at domestic franchised locations. Officials said same-store sales are expected to continue to decline “in the mid-single digits” this fiscal year. Full-year earnings per share are expected to total between 30 cents and 35 cents, down from initial projections made in July for earnings between 50 cents and 70 cents. —In a sign of the times,

At Carrols, total revenues rose 2.7 percent to $209.1 million for its third quarter ended Sept. 28, aided by menu price increases and the openings of four new restaurants. Same-store sales increased 3.5 percent at Burger King, fell 1.9 percent at Pollo Tropical and dipped 0.9 percent at Taco Cabana. The company said it lost about 150 operating days during the third quarter because Hurricane Ike forced the closure of several Taco Cabana locations in Texas. —In a sign of the times,

The company said it expected per-share earnings for the third quarter to total between 15 cents and 17 cents, down from earnings a year ago of 27 cents per share. —In a sign of the times,

TAGS: Finance News
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.