MARYVILLE Tenn. Ruby Tuesday Inc., operator or franchisor to 941 namesake casual-dining restaurants, posted on Wednesday first quarter net income of $250,000, the company’s lowest quarterly profit since at least 1994, when public filings for the company begin.
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 latest quarter ended Sept. 2, the company’s first quarter of its fiscal 2009, Ruby Tuesday earned $250,000, or 1 cent per share, compared with year-ago earnings of $11.1 million, or 21 cents a share. Securities analysts had expected, on average, earnings of 11 cents per share in the latest quarter, according to data from Thomson Financial.
The 97-percent plunge came as a result of slowed sales, increased interest expense and heightened operating costs. Company officials cited challenges from the weak domestic economy that has kept consumer spending levels depressed, a trend affecting many restaurant chains but especially those in the casual-dining sector.
“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,” said Sandy Beall, the company’s founder and chief executive.
Company officials pointed especially to the hard-hit South, where the majority of Ruby Tuesday units operate.
The chain has spent much of the past year remodeling restaurants and upgrading the brand in terms of menu offerings, service and facilities. The macroeconomic headwinds have prevailed, however. First quarter revenue fell 6.6 percent from a year earlier to $324.0 million. Same-store sales fell 10.8 percent at corporate Ruby Tuesday restaurants and 7.9 percent at domestic franchised locations.
Officials said the chain’s same-store sales, which have fallen for more than a year, are expected to decline “at a rate in the mid-single digits” this fiscal year, though they are expected to improve sequentially each quarter. Full-year earnings per share are expected to total between 30 cents and 35 cents, down from initial projections made in July that called for a range of between 50 cents and 70 cents.
One bright spot for the quarter: The casual-dining company said it had reduced debt through its available cash flow by about $40 million. Officials said they plan to continue a focus on paying down debt and strengthening the balance sheet. This fiscal year the company will cut debt, which stands at about $545 million, by as much as $90 million, it reported.
“These are difficult times for all,” Beall said. “We have made great investments in our brand and our operations teams have executed very well in bringing those investments to life ...We believe we are well-positioned and all of our resources are focused on attracting guests and strengthening our balance sheet by paying down debt.”
Debt payments and a company’s total leverage have become major concerns for certain restaurant companies as they face declining cash reserves because of slowed sales and increased costs. Such companies as Denny’s Corp., Carrols Restaurant Group Inc. and Ruth’s Hospitality Group Inc. have recently said they would work to reduce debt burdens.