) turnaround is going to take a while longer. This Zacks Rank #5
(Strong Sell) struggled in the recent quarter and is now expected
to lose money in fiscal 2014.
Ruby Tuesday operates 778 company-owned or franchise Ruby Tuesday
brand restaurants in 45 states, DC, Guam and 11 other countries.
Big Miss in the Fiscal First Quarter
On Oct 9, Ruby Tuesday reported its fiscal first quarter 2014
earnings. It was coming off of a big miss in the prior quarter and
is in the midst of a turnaround.
The turnaround appears to be postponed. Ruby Tuesday missed the
Zacks Consensus Estimate by 21 cents. Earnings were -$0.26 compared
to the consensus of -$0.05.
Same-restaurant sales fell 11.4% at company-owned restaurants and
8.4% at franchise restaurants. This was below the company's
The company said that the quarter was challenging due to the
failure of the economy to improve.
It is doing a core menu transformation to spice things up and has
already added pretzel burgers and flatbreads.
Fiscal 2014 will be Challenging
Ruby Tuesday has stopped giving forward earnings guidance while it
conducts this turnaround but it does anticipate same-restaurant
sales to be down high single digits in the second quarter with
sequential improvement in the third and fourth quarter.
Same-restaurant sales are expected to be positive by the fourth
Earnings Estimates Slide
With the big miss and the lackluster guidance, the analysts lowered
both fiscal 2014 and fiscal 2015 estimates.
Zacks fiscal 2014 estimate plunged to -$0.48 from $0.14 just 90
days before. It is an earnings decline of 308% from fiscal 2013.
While the loss is expected to be less in fiscal 2015, the analysts
still see -$0.07 in 2015.
Shares At 1-Year Lows
Investors sold off the shares on the earnings miss. Shares have hit
a 1-year low.
The Zacks Rank is a short-term recommendation. Ruby Tuesday has a
longer term turnaround plan. Still, with sales expected to be weak
over the next few quarters, the turnaround in the shares is
probably not going to be imminent.
In the casual dining sector, investors might want to consider
Red Robin Gourmet Burger
), a Zacks Rank #1 (Strong Buy), or
Bob Evans Farms Inc.
), a Zacks Rank #2 (Buy), as alternatives.
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