Over the past year, Chipotle Mexican Grill has lost 43% of its market value on concerns about food-borne illnesses.
But there's another restaurant chain that has performed worse than Chipotle. That's Ruby Tuesday (RT) , which is down 44% over the past year. Despite a recent rebound in its share price, investors should avoid the stock.
Three weeks ago, Ruby Tuesday announced disastrous results for the first quarter of its 2017 fiscal year. The company registered an 8.2% year-over-year drop in revenue. It noted that it had closed 95 underperforming restaurants during the quarter, leading to an impairment charge of $30.2 million. Ruby Tuesday also reported a net loss of $39.7 million, or 66 cents a share.
Last week, executives and directors at the company undertook a campaign to gobble up more than 240,000 shares in the beleaguered company. That helped improve investor sentiment, sending the stock on a strong rally. That momentum was short-lived, however. Shares fell nearly 2% in Wednesday trading. Since the beginning of the year, this restaurant's stock has fallen by 46%. (The chart below shows the performance over the past year.)
Granted, the entire restaurant sector has been facing headwinds. Sales have been sluggish at McDonald's, as well as at relative newcomers such as Panera Bread. That's largely because of increasing competition within the sector, low prices at supermarkets for meat and produce and prepared meals.
Ruby Tuesday is in a particularly sticky position. The company's restaurant concept is not exactly part of the fast-casual segment, but it's more expensive than fast food.
Ruby Tuesday is perhaps the most toxic restaurant stock on the market today. Investors should stay away.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.