Ruby Tuesday Inc. is testing menu initiatives and planning TV commercials in an attempt to reverse declining net income and same-store sales from its fiscal 2012 first quarter.
For the first quarter ended Aug. 30, net income fell 75 percent to $3.1 million, compared with $12.4 million the previous year, the company reported. Earnings per share for the quarter were five cents, compared with 19 cents per share the previous year.
Same-store sales decreased 4.1 percent at company-owned restaurants compared with the previous year, according to a company earnings release. Some of the sales decline was attributed to the effects of Hurricane Irene in August.
Sandy Beall, Ruby Tuesday chief executive and founder, expressed disappointment in the sales results.
“We anticipated our first quarter would be challenging, and while our earnings results were within our guidance of [three to six] cents per share, we are disappointed with our sales results for the quarter, which were below our expectations,” Beall said.
“We continue to operate in an aggressive competitive promotional environment with very heavy advertising levels, and we expect these competitive marketing trends to continue, given the soft economy and low consumer confidence,” he added. “To address these sales issues, we have several initiatives in test that are designed to position our brand favorably with the consumer and help us increase our same-restaurant sales.”
Revenue increased 9.1 percent in the first quarter to $330.3 million, compared with $302.7 million in 2010.
Ruby Tuesday is focusing on new products, such as the Seafood Festival limited-time offer starting at $9.99, to boost same-store sales.
The company is also testing new promotions while offering a test menu of more than 40 entrees that includes a complimentary Fresh Endless Garden Bar and garlic cheese biscuits, starting at $8.99.
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Ruby Tuesday is also testing a new limited-time lunch offer of soup, a salad bowl and garlic cheese biscuits that ranges from $5.99 to $6.99. Beall said the offer “continues to perform well in our test markets.”
“New, compelling value offerings such as these, which are being communicated through television, in addition to our continued focus on improving the overall guest experience, are designed to increase our traffic and sales,” Beall said.
Ruby Tuesday is also continuing to convert underperforming restaurants into Marlin & Ray’s units, with openings of the seafood restaurant in Manassas, Va., on June 1 and in Atlanta on August 24.
Other first-quarter highlights:
• The company permanently closed two Ruby Tuesday restaurants and temporarily closed another two restaurants in anticipation of converting them to other concepts. No new Ruby Tuesday units opened in the quarter.
• Domestic and international franchisees opened two new Ruby Tuesday restaurants and closed three Ruby Tuesday restaurants.
• The company repurchased 2 million shares of its common stock at an average price of $9.22 per share. As of the end of the first quarter, 5.9 million shares remained authorized for repurchase under the company’s share repurchase program.
• The company spent $8.4 million on capital expenditures.
Maryville, Tenn.-based Ruby Tuesday owns and operates 746 casual-dining restaurants in 45 states, Washington D.C., 14 foreign countries and Guam.
Contact Alan Snel at [email protected].
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