Ruby Tuesday Inc.
) adjusted earnings of 12 cents per share in the fourth quarter
of 2013 fell short of the Zacks Consensus Estimate by 36.8% as
well as the year-ago earnings of 21 cents by 42.9%. Earnings
suffered mainly due to lower revenues. Higher restaurant
operating costs also marred earnings. Adjusted earnings were
nowhere near the management guidance of 28-32 cents.
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Revenues in the quarter slipped 4.6% year over year to $316.1
million. Revenues also missed the Zacks Consensus Estimate of
$327.0 million by 3.4%. The year-over-year downside in revenues
was due to the closure of 8 company-owned Ruby Tuesday units, a
decline in same restaurant sales at its namesake brand and a
tough year-over-year comparison owing to an extra operating day
in the comparable period of last year led to the decline.
The owner of its namesake brand and Lime Fresh Mexican Grill,
Ruby Tuesday posted a 3.1% downside in comparable store sales at
company-owned restaurants. Its franchised division also saw a
5.1% contraction in comps. Same-store sales also lagged the flat
same-store sales guidance issued by management for the
In fiscal 2013, adjusted earnings were halved to 23 cents from
the year-ago level mainly due to a 4.6% decline in revenues.
Continually sluggish same-store sales resulted in the revenue
The company bought back 4.1 million shares of common stock during
the year for $30.1 million with no repurchases made in the fourth
Fiscal 2014 Outlook
For fiscal 2014, management expects comps to decline in
high-single digits in the first quarter of 2014 and then improve
gradually in the latter part of the year backed by menu
innovation and marketing campaigns.
Management expects to generate $10-$15 million of cash proceeds
by offloading excess real estate and a year-over-year improvement
in free cash flow. However, due to lesser visibility for the
upcoming year, management chose not to provide earnings guidance
The restaurateur opened 9 Lime Fresh restaurants and closed 6
company-owned Ruby Tuesday restaurants in fiscal 2013.
Ruby Tuesday failed to beat the Zacks Consensus Estimate on both
counts in all four quarters of fiscal 2013. After barely meeting
the earnings estimates in the past two quarters, it missed it by
a wide margin in the reported quarter. On the revenue front, the
performance was highly disappointing throughout the year.
Consistently weak year-over-year comparison on both lines is a
spot of bother. The company refrained from providing an earnings
guidance, which adds to our concern.
While management is striving to transition the brand by shutting
down the underperforming units and resorting to several sales
building initiatives, the efforts are yet to pay off. Hence, we
prefer to remain on the sidelines for this Zacks Rank #3 (Hold)
stock at the current level.
However, restaurateurs currently performing well include B
urger King Worldwide Inc.
Cracker Barrel Old Country Store Inc.
Domino's Pizza Inc.
) all carrying a Zacks Rank #2 (Buy).