Ruby Tuesday Inc. has hired investment bank Goldman Sachs to explore strategic alternatives, according to a report posted Friday on the website DebtWire.
According to unnamed sources in the report, the Maryville, Tenn.-based casual-dining chain is likely seeking a leveraged buyout. The report did not speculate on a timeframe.
Officials with Ruby Tuesday did not respond to requests for comment at press time.
The news, however, had a positive impact on Ruby Tuesday’s stock price, which rose 6 percent by late afternoon on Monday to about $7.28 after opening at $6.84.
Operating about 703 of its namesake restaurants and franchising another 75, Ruby Tuesday has struggled with declining same-store sales and profits for some time. The company also operates and franchises about 29 locations of the fast-casual Lime Fresh concept, as of the September-ended first quarter.
For the first quarter, Ruby Tuesday recorded a net loss of $22.2 million compared with income of $2.6 million a year ago. Revenue fell nearly 12 percent to $288 million. Same-store sales at company-owned units decreased 11.4 percent.
In November, the company announced a cost-cutting initiative that resulted in the elimination of 50 corporate positions, a move that company officials said would allow the company to invest in “repositioning initiatives.”
After reporting first-quarter results in October, James J. “JJ” Buettgen, Ruby Tuesday’s president and chief executive, said efforts were underway to re-establish Ruby Tuesday as a “fun, energetic and broadly appealing brand.”
In August, for example, the chain launched new pretzel burgers and flatbreads as part of an ongoing menu revamp designed to address consumer desire for more “innovation, variety and affordability” with price points under $10, Buettgen said.
The company said it had hired a consulting firm to identify and implement other cost-cutting measures. Ruby Tuesday expects to trim about $6 million in general and administrative expenses per year, starting in fiscal 2015.
The brand has also seen some executive changes. Earlier this year, board chairman Matthew Drapkin resigned and was replaced by Buettgen.
The company’s senior vice president, chief people officer Robert LeBoeuf also departed from Ruby Tuesday at the end of October, according to filings with the U.S. Securities and Exchange Commission.
On Monday, Ruby Tuesday said it has agreed to pay $575,000 to settle a lawsuit filed by the U.S. Equal Employment Opportunity Commission on behalf of older workers who alleged they were discriminated against during the hiring process. The lawsuit involved workers from three open restaurants and three that have closed in Ohio and Pennsylvania, the company said.
Ruby Tuesday continues to strongly deny the allegation, but it has decided to settle without conceding liability to reduce the disruption of daily business and avoid the cost of protracted litigation.
In a statement, Buettgen said, “Ruby Tuesday is committed to quality operations and to providing opportunities and training that will allow team members to advance and develop to their full potential. Our team members are our most valuable asset as they are the ones who bring our plans to life everyday in our restaurants.”
Update: Dec. 9, 2013 This story has been updated to include information about Ruby Tuesday’s recent lawsuit settlement.