Ruby Tuesday, Inc. (RT)

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Ruby Tuesday (RT)

Q1 2012 Earnings Call

October 05, 2011 5:00 pm ET

Executives

Marguerite N. Duffy - Chief Financial Officer, Senior Vice President and Principal Accounting Officer

Kimberly M. Grant - Chief Operations Officer and Executive Vice President

Daniel P. Dillon - Senior Vice President of Brand Development

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

Greg Ashley - Vice President of Finance

Analysts

Keith Siegner - Crédit Suisse AG, Research Division

Jeffrey F. Omohundro - Wells Fargo Securities, LLC, Research Division

Brad Ludington - KeyBanc Capital Markets Inc., Research Division

Robert M. Derrington - Morgan Keegan & Company, Inc., Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Christopher T. O'Cull - SunTrust Robinson Humphrey, Inc., Research Division

Presentation

Operator

Greetings, and welcome to the Ruby Tuesday First Quarter Fiscal Year 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Greg Ashley, Vice President of Finance for Ruby Tuesday. Thank you, Mr. Ashley. You may begin.

Greg Ashley

Thank you, Manny, and thanks all of you for joining us this evening. With me today are Sandy Beall, Ruby Tuesday Chairman and CEO; Margie Duffy, Chief Financial Officer; Dan Dillon, Senior Vice President, Brand Development; and Kimberly Grant, 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 notes regarding forward-looking information in our press release and most recently filed Form 10-K. We plan to release second quarter fiscal '12 earnings in early January. Our first quarter earnings were released today after the market closed, and 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 the following: An overview of our first quarter financial results; our fiscal 2012 outlook; 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.

Samuel E. Beall

Thanks, Greg. I'd like to welcome all of you for listening in this evening, and thank you for joining us on our first quarter earnings call. While our same restaurant sales for the quarter were below our expectations, our quarter included several positive accomplishments including traction on our new value-oriented test offerings such as our pre-Garden Bar with all 40 entrees, progress on media tests at several markets, the opening our second and third Marlin & Ray's conversion restaurants and the first step and execution of our plans to return excess free cash flow to our shareholders through our implemented share repurchase program.

Our same restaurant sales results for the quarter were minus 4.1, which were negatively impacted by approximately 40 basis points due to the adverse impact of Hurricane Irene. I trailed KNAPP-TRACK on them on a 1-year and of course 2-year basis. That said, though, our earnings of $0.05 per share were within our guidance range and overall we had respectable profits this quarter considering the sales. After factoring in the lower same-store sales, of course it didn't provide us any leverage and hurt bottom line quite a bit, coupled with higher levels of advertising and promotional expense. Margie will provide more commentary on this later.

We continue to see a very aggressive promotional environment with heavy advertising levels. I think it almost basically peaked this summer with Red Lobster's effective summer promotion, but throughout really the entire industry. As noted on the last call while we're having some success with our marketing strategies, the competitive promotions continue to remain very aggressive and our current promotional programs do not compete as well as those high TV programs of a lot of our competition.

As a result, we've been testing various value-oriented offerings in some of our markets. A portion of these tests have been supported by media, including a test menu in selected markets offering Fresh Endless Garden Bar and fresh-baked garlic cheese biscuits, all complimentary with 40 entrees starting at $8.95, and Dan will talk about this more later.

While our primary focus remains on strength in the Ruby Tuesday brand, we continue to make good progress in other areas of our 3-year strategic plan. The first one is our conversion strategy. It continues to gain traction as we now have 4 Marlin & Ray locations open, including new locations open during the quarter in Manassas, Virginia; Acworth, Georgia; as well as Lithonia, Georgia, with all of those are Atlanta market. We continue to see positive sales lifts in our surrounding Ruby Tuesday restaurants post-conversion, which is a big benefit of our conversion strategy.

We believe Marlin & Ray's has the most growth potential. It's clearly a differentiated brand position and if successful, it's where we will invest our conversion dollars. We've learned that much so far.

Secondly, we continue to make progress on our in-line growth strategy with Lime Fresh Mexican Grill. We just opened our first location today in Huntsville, Alabama; had a great high-volume lunch. But what's key is what it does 6 months from now, but we're excited about that. We have a second location scheduled open to mid-November and then basically every 30 days throughout the balance of the year. Our remaining openings will include Washington D.C., and back to the southeast, Atlanta, Alabama and Tennessee. Lime is a strong brand that fits well with our focus on fresh food and great service. It takes fast casual to, I think, the service levels of casual dining, so it's a great blend of quick food with key casual dining service points and food quality points. It's also low-risk, very low capital-intensive and very high return, so we're excited about this.

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