This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: Ruby Tuesday Loss Widens

NEW YORK (The Deal) -- Ruby Tuesday's (RT) future as a public company is looking more and more grim as its losses continue to pile up.

The Maryville, Tenn.-casual dining chain reported Wednesday a net loss of close to $35 million on $276 million in revenue for its fiscal quarter ended Dec. 3, compared to a net loss of $4.2 million on $300 million in revenue for the same quarter one year ago.

Ruby Tuesday attributed the declining sales to increased competition in the casual dining sector and an unsuccessful format change at the restaurant.

To help cut additional losses, Ruby Tuesday said it will close 30 underperforming restaurants this year. Some company-owned properties will be put up for sale, while leases on others set to expire will not be renewed. Reports surfaced last year that Ruby Tuesday hired Goldman Sachs  (GS) to explore strategic alternatives. CEO and chairman James Buettgen declined to discuss those rumors during a Wednesday conference call.

As Ruby Tuesday continues to lose money, some industry sources think potential bidders will wait until the chain's value declines further before making an approach. "It's really hard to kill the brand," said one industry banker not involved with the company. "Somebody will likely see value in the brand."

Sun Capital Partners of Boca Raton, Fla., and San Francisco's Golden Gate Capital have been mentioned by sources as likely bidders for Ruby Tuesday.

Closing 30 of its nearly 800 restaurants is likely just the beginning for Ruby Tuesday. Industry watchers expect additional store closings to follow, especially if Ruby Tuesday's sales continue to fall.

Buettgen admitted during the conference call that the company erred in its attempt to shift from a casual dining chain to a more upscale restaurant, losing core customers to higher prices. Like so many of its competitors, Ruby Tuesday recently rolled out flatbreads and a pretzel-bun burger in an attempt to lure customers back as part of its menu overhaul.

"The reality of this transformation effort was that the changes did not resonate with Ruby Tuesday core users," Buettgen said during the call. "As a result, many loyal guests quickly stopped visiting as frequently or stopped visiting at all."

He added: "The brand was not able to attract new, more affluent, polished casual diners." As a result, the brand experienced a decline in guest count and sales. Buettgen became Ruby Tuesday's CEO in late 2012, replacing founder Sandy Beall who retired.

Bond investors have retreated from Ruby Tuesday on the heels of its weak earnings report. According to a Standard & Poor's Leveraged Comment & Data report Thursday, the bonds on its $250 million senior notes, due in 2020, have been trading at about 88 points, down from 94 points as of Thursday afternoon. Meanwhile, Ruby Tuesday continues to burn through cash. Between June 4 and Dec. 3, Ruby Tuesday's cash pile dwindled to $23.6 million from $53 million.

Ruby Tuesday shares were trading 1% higher, at $6.05, on Thursday afternoon with its market capitalization near $376 million. The company did not return calls on Thursday.

--Written by Demitri Diakantonis in New York 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,106.70 +29.83 0.17%
S&P 500 2,000.02 +2.10 0.11%
NASDAQ 4,570.6370 +13.29 0.29%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs