MARYVILLE Tenn. Ruby Tuesday said its upscale repositioning is starting to gain traction with consumers, leading the company to its best quarterly sales performance in three years.
The 884-unit chain will continue to build promotions around its more premium menu items, such as lobster and steak, as it seeks to grow its average check from $12 to a range of $12.50 to $14.50, chief executive Sandy Beall said Wednesday in a conference call with investors.
Same-store sales at company stores fell 0.7 percent for the quarter ended March 2, but Beall noted that comps turned slightly positive in January and February, despite severe winter weather that gripped much of the country. Same-store sales at franchised branches declined 5.3 percent.
Ruby Tuesday began an extensive rebranding process in 2007 that has resulted in a menu overhaul and redesigned restaurants with a greater focus on the bar. Beall pointed to the addition of such upscale items as lobster tails and a four-course brunch menu, as well as the installation of high-definition flat-screen televisions in the bar areas as “contributors to the momentum in our business.”
“We believe our repositioning efforts and investments in quality menu options, combined with targeted and effective marketing, are driving improved results,” he said.
Ruby Tuesday is continuing to push its higher ticket items with such specials as a $13.99 steak and lobster dinner on Tuesdays and a bundled weekend dinner for two, which includes a shared appetizer, two entrees and a shared dessert, for $19.99 a person. Analysts said the promotions would likely help the chain encourage customers to spend more.
"We believe that these initiatives continue to emphasize the company's premium positioning, increasing guest perception of value while contributing to a higher average check," said Brad Ludington, an analyst with KeyBanc Capital Markets.
Ruby Tuesday reported net income of $17.8 million, or 28 cents per share, in the third quarter, more than triple its profit of $4.8 million, or 9 cents a share, in the year-ago quarter, when it booked $14.3 million in impairment charges. Latest-quarter revenue slipped to $307.2 million from $317.5 million in last year's third quarter.
Beall said the company reduced its debt another $43 million during the quarter, bringing the total year-to-date debt paydown to $171 million.
For the full fiscal 2010, Ruby Tuesday expects per-share earnings between 60 cents and 65 cents, compared with a net loss last year. Same-store sales for 2010 are projected to fall 1 percent to 2 percent.
“Our top priorities continue to be to increase average restaurant sales and traffic, to maximize cash flow and pay down debt, and further strengthen and differentiate our brand," Beall said.
Ruby Tuesday said it would not develop any new corporate-owned restaurants in 2010 and noted it would close a total of 14 for the year, including one in the fourth quarter. The closings are part of a previously announced plan to close 30 restaurants over time as their leases expire. However, domestic franchisees are expected to open two to three new units this year and international franchisees will open three to five restaurants.
Contact Elissa Elan at [email protected].
Contact Molly Gise at [email protected].