MARYVILLE Tenn. Ruby Tuesday Inc. said Thursday it would shutter 40 locations during its current February-ending third quarter and an additional 30 units during the “next several years,” which together totals nearly 10 percent of domestic corporate locations.
The casual-dining operation has struggled against slowed sales, increased costs from a renovation effort and high levels of debt during the past few years. During its latest quarter ended Sept. 2, the company posted the lowest quarterly profit ever since at least 1994, when public filings for Ruby Tuesday began. Same-store sales fell 10.8 percent at corporate restaurants and 7.9 percent at domestic franchised locations.
In its statement outlining the closures, the company added that between 35 and 40 surplus properties also are marketed for sale. These properties were undeveloped real estate assets the company had purchased and will now sell, said Steve Rockwell, vice president of finance. Of the 40 restaurants earmarked for closure during the current quarter, a little less than half of the locations already have been shuttered, and the remaining restaurants will be closed in January, Rockwell added. The restaurant closures were spread throughout the system, he said.
The Maryville, Tenn.-based Ruby Tuesday operates or franchises 942 restaurants worldwide, including 714 U.S.-based locations operated by the company.
Restructuring charges for impairment and lease terminations or obligations should total between $40 million and $55 million, the company said, and will be taken in both the November-ended second quarter and the current third quarter. The company said details would be given during its second-quarter conference call on Jan. 7.
Ruby Tuesday added that it expected to remain compliant with bank covenants, which had been an issue for the company prior to a debt restructuring plan it closed in April that helped it to avoid default. As of Sept. 2, the company held about $546 million in long-term debt, including capital leases.
On top of the restructuring charges, Ruby Tuesday said it would take a $19-million, pre-tax, non-cash charge for goodwill impairment in its second quarter. Goodwill impairment charges relate to the value of trademarks and other intangible assets, and the company said the write down was based on “the poor overall economic conditions, declines in fair value, declining sales É and a challenging environment for the restaurant industry.”