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Ruby Tuesday’s profit plummets 48% in 1st Q

MARYVILLE Tenn. A month after acknowledging it had “underestimated the impact” of higher gas prices and general economic factors on consumer spending, Ruby Tuesday Inc. on Wednesday reported a 48.5-percent plunge in first-quarter profit from a year earlier. The results reflected negative same-store sales and the costs of a two-year remodeling initiative.

The operator or franchisor of 935 namesake casual-dining restaurants said it would attempt to firm up sales during the remainder of its second quarter with “a much stronger value and promotion strategy,” starting with the offer of new bargain-priced lunches.

Net income for the casual-dining company’s fiscal 2008 first quarter, which ended Sept. 4, totaled $11.1 million, or 21 cents per share, compared with a year-earlier profit of $21.6 million, or 37 cents per share. The most recent results included costs of 5 cents per share for a remodeling initiative begun by the chain almost two years ago. The systemwide renovation was undertaken to upgrade the chain’s brand image.

First-quarter total revenue increased 2.4 percent to $346.8 million. Same-store sales fell 4.8 percent at corporate locations and dropped 2.9 percent at domestic franchised restaurants. In the current quarter, same-store sales were down about 10.5 percent in September, but are expected to improve to down 3 percent to 4 percent in November, the company said.

While the latest results met the reduced targets set last month, Ruby Tuesday still was forced to lower by as much as 58 cents per share its full-year profit estimate. Ruby Tuesday now expects to earn between $1.01 per share and $1.13 per share for fiscal 2008, based on expectations that same-store sales for the year will be down 3 percent to 5 percent at corporate restaurants. That estimate also includes between 18 cents and 20 cents per share in costs for Ruby Tuesday’s remodels, which should be completed at all corporate restaurants by the end of the current fiscal year, the company added.

“Our immediate challenge is to respond to the current sales environment with a much stronger value and promotion strategy that we will start in the second week of October,” the company said in a statement.

Ruby Tuesday said it would first offer value-focused “Fresh Combinations” at lunch starting at $6.99, and then introduce more promotions from November through January. In addition, the company disclosed plans for a direct-mail advertising campaign targeted at higher-income homes. The materials highlight the chain’s upscaling effort, which extends to new menu choices and the updated restaurant design, the company said.

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