Ruby Tuesday, Inc. (RT)
F3Q10 Earnings Call
April 7, 2010 5:00 pm ET
Steve Rockwell - Vice President, Finance
Samuel E. Beall - Chairman of the Board, President, Chief Executive Officer
Marguerite N. Duffy - Chief Financial Officer, Senior Vice President
Mark Young - Senior Vice President, Marketing
Kimberly M. Grant - Executive Vice President
Jeffrey Omohundro - Wells Fargo
Keith Siegner - Credit Suisse
Thomas Forte - Telsey Advisory Group
Joseph Buckley - Banc of America Merrill Lynch
Brad Ludington - Keybanc Capital Markets
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Thank you and thanks to all of you for joining us this evening. With me today are Sandy Beall, Ruby Tuesday Chairman and CEO; Margie Duffy, Chief Financial Officer; Mark Young, our Senior Vice President and Chief Marketing Officer and Kimberly Grant, our Executive Vice President.
I would like to remind you that there are likely to be forward-looking statements in our comments and I refer you to the note regarding forward-looking information in our press release and the most recently filed Form 10-Q. We plan to release fourth quarter fiscal year 2010 earnings in late July, a couple of weeks later than normal because of a change in the date of our board meeting.
Our third quarter earnings were released today after the market closed. A copy of our press release can be found on our Investor Relations section of our website at rubytuesday.com and is also available on Business Wire, First Call and other wire services.
Our format today includes a review of our third quarter results, an update of our fiscal 2010 outlook and a review of our plans and strategies. At the conclusion of our prepared remarks, we will open up the lines for questions.
I will now turn the call over to Sandy.
First of all I want to thank all of you all for listening in this afternoon. We are very excited about the momentum in our business. Our third quarter was our best sales quarter in the last three years even with the paralyzing winter storms in many of the markets in each month of the quarter and despite lapping the start of our improving trends in last year’s third quarter which was approximately 4 points better than last year’s second quarter. So overall we feel it was a great sales quarter.
We believe the consistent focus over the last several years on our brand strategies of greatness, hospitality, uncompromising freshness and quality, a fresh new look and compelling value is the foundation of this improvement. We are successfully getting people in to see the new Ruby Tuesday and they are coming back. We have also made some good progress on our key objectives for this year as a result of the cost savings we implemented last year; closing underperforming restaurants and stopping the decline in same store sales.
Our key objective as we began the fiscal year were and continue to be to increase same restaurant sales and traffic, to maximize cash flow and reduce our debt and to further strengthen our brand for high quality casual dining food and service and by providing our guests with compelling value. We made great headway in all of these areas.
Our driving focus is to increase same restaurant sales and traffic. Same restaurant sales were down 0.7% in the quarter and we estimate that the bad weather reduced sales by 1.5-2 percentage points. Same restaurant sales were slightly positive in January and February even with the weather impact which was significant in February.
These results compare to a 1.7 decline in the second quarter and a 3.1 decline in the first quarter. We introduced our mid-year menu update in November. We added a great deal of variety with a continued focus on quality, value and differentiation, all aligned with our high quality casual dining positioning. Our guests are responding well to this new menu. Our price increase was approximately 1-2% and our change in preference helped by our new menu design was 0.5 to about 1%.
One of our long-term objectives is to increase our average check to $12.50 to $14.50 and we are now making progress towards that. We took steps forward on achieving this goal in the quarter as the new menu and our promotional strategy resulted in a higher average check, as we mentioned offset by some decline in traffic. Our marketing strategy gives us much better control over our sales destiny. We better know what levers to pull to get the results we want. By effectively managing our promotions we achieved good sales and strong profits. We traded some traffic for check in the quarter to the benefit of profitability. We think this is a very good balance.
Our trends are good and our sales and traffic outperformed Knapp Track, the industry benchmark, both on a one-year and two-year basis. The improvement in our sales and balance sheet and our continued strong operations have allowed us to begin to develop longer term strategies to improve our return on assets and create additional shareholder value.
Now I will turn the call over to Margie to discuss our financial performance and update our guidance for the year.
Thank you Sandy. Good evening everyone. We were pleased with our third quarter results. Our ability to increase check helped restaurant operating margins and cash flows contributing to our debt pay down. I will review the quarter and update our guidance for the remainder of fiscal 2010.