Ruby Tuesday, Inc. (RT)

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Ruby Tuesday (RT)

Q3 2011 Earnings Call

April 06, 2011 5:00 pm ET

Executives

Dan Dillon - Senior Vice President of Brand Development

Greg Ashley - Vice President - Finance

Kimberly Grant - Chief Operations Officer and Executive Vice President

Marguerite Duffy - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Assistant Secretary

Samuel Beall - Co-Founder, Executive Chairman, Chief Executive Officer and President

Analysts

Robert Derrington - Morgan Keegan & Company, Inc.

Bryan Elliott - Raymond James & Associates, Inc.

Brad Ludington - KeyBanc Capital Markets Inc.

Keith Siegner - Crédit Suisse AG

Jeffrey Omohundro - Wells Fargo Securities, LLC

Joseph Buckley - BofA Merrill Lynch

Presentation

Operator

Greetings, and welcome to the Ruby Tuesday Inc. Third Quarter Fiscal Year 2011 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Greg Ashley, Vice President, Finance for Ruby Tuesday. Thank you. You may begin.

Greg Ashley

Thank you, Joe. 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; Kimberly Grant, Executive Vice President; and Dan Dillon, Senior Vice President, Brand Development.

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 most recently filed Form 8-K. We plan to release fourth quarter fiscal '11 earnings in late July.

Our third quarter earnings were released today after the market closed. A copy of our press release can be found on the Investor Relations section of our website at rubytuesday.com and is also available on Business Wire, FirstCall and other financial media outlets.

Our format today includes an overview of our third quarter financial results, an outlook for the remainder of fiscal 2011, and a review of our plans and strategies. At the conclusion of our prepared remarks, we will respond to your questions. I will now turn the call over to Sandy Beall.

Samuel Beall

Thanks, Greg. First of all, I would like to welcome all of you for listening in this afternoon. Thanks for joining us.

Overall, we had a reasonably good quarter, considering the negative impact to sales and EPS that we experienced due to the severe winter weather on the East Coast during the quarter. Unlike most of our competitors, the majority of our company-owned locations, approximately 90% of those, are located in the East United States. And this was an area that was hit especially hard as you know in December and January.

Our teams has worked diligently. And we were able to accomplish a lot during the quarter, including acquiring the majority of our franchise partnerships, the balance of which we bought in the fourth quarter; opening two new conversion concepts; positioning ourselves for a new line of growth in fiscal '12; and launching a brand-new menu, I think, which launches actually this week, today, with lots of great offerings to continue to strengthen our brand.

Our same-store sales for the third quarter were negative as you saw, 1.2% slightly trailing KNAPP-TRACK bar grill and also trailing KNAPP-TRACK all-casual dining, which includes bar grill, which has been the benchmark of course, this is on a one-year basis -- I'm sorry, we trailed casual dining on a one-year basis about approximately 1.5 points. On a two-year basis though, we figure we're trending better than KNAPP bar and grill still by over three points and are favorable to KNAPP all casual by over one point.

Absent the snow-related impact during the quarter, which we estimate at 1.5 to two percentage points on top of last year's negative weather impact, we would have had our fourth quarter in a row positive same-restaurant sales.

We have seen sales in bar grill lag casual dining overall and have recently seen some non-weather-related issues in some of our markets, more so in the south, which is most likely due to the gas prices being significantly higher year-over-year, and tracking a bit like we saw in 2008. Our sense is that the economy is softer, than it was in the fall that consumers are adjusting to spending behavior. We are actively responding with sales building programs to drive traffic in these markets, which we hope will offset this behavior over time.

We've given our third quarter diluted sales from the winter weather impact in addition to higher gas prices, resulting in a sluggish economy for mass America, maybe not all of America, including the higher end. But we have scaled back our same-restaurant sales guidance for the year somewhat.

Our diluted earnings per share of $0.25, this is $0.24, excluding the impact from franchise partner acquisitions. But the $0.24 trailed our prior year results of $0.28. However excluding the weather dilution impact, estimated $0.03 to $0.04 per share on the quarter, we would have been in line with the prior year. And we actually exceeded our internal expectations for the quarter, which probably doesn't mean much. But we exceeded, would have exceeded, what we had expected, even after absorbing the various investments we made this year.

We will have invested approximately $9 million in loan in our fresh bread program, and our new marketing program brand research initiatives by the end of fiscal year '11, and with some offsetting costs. But basically, a big investment year. We'd be glad to get this year behind us. Next year, we don't have of these planned at all.

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