Ruby Tuesday Inc. said with its second-quarter results on Wednesday that it would be immediately closing its 13 Marlin & Ray’s restaurants in order to focus its efforts on bettering the company’s core: Ruby Tuesday and fast-casual concept Lime Fresh Mexican Grill.

“The Marlin & Ray’s brand does not represent a meaningful conversion opportunity for us going forward,” said company chief executive James J. “JJ” Buettgen during his first earnings call since taking over the position on Dec. 1.

For similar reasons, he said, the company will be closing its single Wok Hay restaurant and will be seeking a buyer for its two Truffles Grill locations.

“Exiting these concepts will allow us to optimally allocate our time, capital and resources to focus on the sales turnaround at Ruby Tuesday restaurants, in addition to creating value with our Lime Fresh fast-casual concept going forward,” Buettgen said. “We believe these are the key brands for our future, and we want to ensure that they are getting our full and undivided attention as a company.”

Employees impacted by the closures will be given the opportunity to transfer to Ruby Tuesday or Lime Fresh locations, he noted.

The closures come after a quarter of flat growth at company-owned Ruby Tuesday restaurants, which saw same-store sales increase 0.3 percent during the period. For the year, the company expects its same-store sales to remain flat, Buettgen said.

Revenue for the second quarter of 2013 was $304.2 million, down from $307.4 million in the same quarter last year.

Ruby Tuesday reported a net loss of $15.1 million, or $0.24 per share, for the quarter ended Dec. 4, compared with a loss of $2.0 million, or $0.03 per share a year earlier. The loss was due in part to expenses related to restaurant closures, as well as finding a new chief executive to replace company founder Sandy Beall, who said he would be stepping down from the post in June.

As recently as Oct. 2011, then-Ruby Tuesday chief executive Beall lauded Marlin & Ray’s as a key growth brand for the company.

“We believe Marlin & Ray’s has the most growth potential,” Beall said in 2011 when the company announced a turnaround plan in response to a steep drop in net income during the first quarter of 2012. “It's clearly a differentiated brand position and, if successful, it's where we will invest our conversion dollars.”

Bob Derrington, managing director and equity research analyst at Northcoast Research, said he believed closing nonessential units would be key to helping Ruby Tuesday revamp its brand. “We applaud the move as management focuses its attention on strengthening its core Ruby Tuesday brand and builds on the potential of its fledgling Lime Mexican Grill concept, both amid the intensely competitive restaurant environment,” he wrote in a research note.

Additionally, Buettgen said the company would be launching revamped marketing efforts in 2013. “I think it's really about figuring out how to more clearly communicate the improvements we've made to the brand over time and the occasion relevance that Ruby Tuesday offers,” he said.

During the quarter, he said, competitors had ramped up their marketing efforts. Buettgen didn't mention these companies by name, but direct Ruby Tuesday competitor Darden Restaurants Inc. recently launched revamped campaigns at its three core brands: Red Lobster, Olive Garden and LongHorn Steakhouse.

Ruby Tuesday will work to better formulate its marketing mix of promotions and television advertising, said Daniel P. Dillon, executive vice president and chief branding officer at the company. Additionally, the company will continue to test new programs and items that can be used to drive traffic, “including new menu items that deliver on everyday value and affordability,” he said.

Contact Erin Dostal at erin.dostal@penton.com.
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