Shares of Ruby Tuesday (NYSE:RT) were down 12.9% in afternoon trading on Friday after reporting lackluster fiscal fourth-quarter earnings and announcing restaurant closures.
Based in Maryville, TN, Ruby Tuesday Inc. together with its subsidiaries engages in the ownership, development, operation, and franchise of casual dining restaurants in both the United States and internationally.
Chairman, President, and CEO JJ Buettgan commented, “Our fourth quarter was impacted by softness in the casual dining industry and increased promotional activity by our peers. Given that we expect the macro environment to remain challenging for some time, we are taking the necessary steps to change the trajectory of our business.”
The company posted adjusted net earnings of $0.10 per share and revenue of $279.3 million. These missed street expectations by $0.01 and $5.68 million respectively. Ruby also saw a 3.7% decrease in same-restaurant sales during Q4, down further from the 1.7% decrease a year before.
As per the official statement, the fourth quarter same-restaurant sales decrease was “driven in part by traffic declines resulting from a challenging and competitive external environment." Year-over-year guest counts fell 4.6% while average check rose 0.9%.
During fiscal year 2016, the company closed 12 corporate-owned Ruby Tuesday restaurants and 17 corporate-owned Lime Fresh Mexican Grill restaurants. However, it also opened one corporate-owned location domestically and one franchised location internationally.
The company plans to create long-term value for shareholders through its “Fresh Start” initiative, which seeks to improve the menu and create new amenities. Ruby Tuesday plans to close another 95 corporate-owned locations in fiscal year 2017, along with another 5-10 as leases expire.
It provided a full-year net income guidance of $0.05 to $0.09 per share, although this does not include the tax costs associated with the aforementioned closures.
Ruby Tuesday is the latest restaurant to announce decreased sales, with McDonald’s (NYSE:MCD) and Wendy’s (NASDAQ:WEN) posting lower year-over-year sales numbers. If Ruby’s new initiatives can’t spark sales growth, the company could be in serious trouble moving forward.
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