Ruby Tuesday Inc. executives said Wednesday that its namesake chain would close 30 of its 779 units over the next quarter as it continued to work on restoring the brand’s value positioning.
Maryville, Tenn.-based Ruby Tuesday has faced several quarters of negative same-store sales, undergone a change of chairmanship in October, eliminated about 70 mostly corporate positions in November (originally announced as 50), and in December reportedly began seeking strategic alternatives, including a possible sale.
Ruby Tuesday reported Wednesday that its net loss widened in the Dec. 3-ended second quarter, to a $34.7 million loss compared with a $4.2 million loss in the prior-year period. Revenue in the quarter fell 7.9 percent, to $276.2 million from $300.1 million in the year-earlier period.
“I own the results, they are what they are, and we're trying to make them better,” James J. “J.J.” Buettgen, president, chief executive and chairman, told analysts after earnings were released.
When an analyst asked Wednesday about December reports that Ruby Tuesday had hired investment bank Goldman Sachs to explore strategic alternatives, including a leveraged buyout, Buettgen said, “There’s no further comment.”
Buettgen, who joined Ruby Tuesday in November 2012, added that significant repositioning moves, including some lower-priced menu items, went into effect only in August. “But I am not sure I communicated as clearly as I could have the difference between what we were planning to do and what had actually hit the restaurants,” he noted.
In the second quarter, same-store sales at company-owned restaurants fell 7.8 percent, and they slipped 5.3 percent at franchised domestic units.
“If comp sales do not stabilize soon, the company will move into a negative cash flow position,” Bryan C. Elliott, an analyst with Raymond James, said in a note Thursday.
Buettgen cautioned that the second quarter started out soft after a challenging first quarter, but same-store sales improved in the last two months of the period.
“Our company-owned same-restaurant sales, which were down 7.8 percent for the second quarter, showed improvement over the first-quarter results as our new-product news, improved operations and brand-building TV advertising began to have a positive impact,” he told analysts.
Ruby Tuesday increased prices 1.9 percent in a mid-November menu rollout that helped offset a 3-percent investment in new products, he added. That menu included the introduction of breaded Southern-style chicken tenders and a range of other menu items starting at $7.99. In mid-August, Ruby Tuesday introduced pretzel burgers and flatbreads at prices under $10.
“We also made progress during the quarter building our lunch daypart, particularly weekday lunch, as our new menu products, along with our Garden Bar, address guest desire for affordability and more everyday dining locations,” Buettgen said.
He also noted that a 6.3-percent decline in guest counts during the quarter was an improvement over the first-quarter drop of 10.8 percent.
Michael O. Moore, Ruby Tuesday’s chief financial officer, said the 30 announced closures are expected to occur over the next few months. Of those closures, 27 would be in the current third quarter and the remaining three in the fourth quarter. Eight of the locations to be closed are on company-owned properties and will be sold after the closures, Moore added.
Buettgen, who assumed the chairman title after the resignation of Matthew Drapkin in October, said the November-announced layoffs — “almost exclusively from our restaurant support center” — would reduce administrative expenses about $3.5 million in fiscal 2014 and $7 million a year beginning in fiscal 2015.
Ruby Tuesday owns and franchises 779 Ruby Tuesday restaurants in 45 states, the District of Columbia, 11 foreign countries, and Guam. Of those units, 703 are company-owned. The company also owns and franchises 29 Lime Fresh restaurants, of which 21 are company-owned.
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