NEW YORK (TheStreet) -- Ruby Tuesday (RT) was plummeting 7.9% to $5.50 in afternoon trading after news broke of a management reshuffle. The restaurant chain filed an SEC report confirming Chairman Matthew Drapkin's resignation and the promotion of CEO and President James Buettgen to the chairmanship.
Drapkin has held the seat since activist investment fund Becker Drapkin Management, a firm he co-founded, purchased a 2.4% stake in the company in November last year. In a separate filing, Drapkin disposed of his 1.45 million units of common stock.
The Tennessee-based business also announced its appointment of Saks CEO Stephen Sadove as lead director. Sadove, who also sits on the J.C. Penney (JCP) - Get Report board, will step down from Saks after its takeover by Hudson Bay Co. has been completed.
Ruby Tuesday has suffered from waning sales as it is buffeted by weak consumer spending. In the first quarter ended Sept. 3, the casual-dining chain reported same-store sales fell 11.4% at company-owned restaurants and 8.4% at franchises year on year. The company forecasts single-digit decreases for same-store sales in the second quarter, with an improvement likely in the third and fourth quarter of FY2014.
TheStreet Ratings team rates Ruby Tuesday as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate Ruby Tuesday (RT) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Ruby Tuesday has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, Ruby Tuesday swung to a loss, reporting -38 cents a share vs. 6 cents a share in the prior year. For the next year, the market is expecting a contraction of 35.5% in earnings (-52 cents vs. -38 cents).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 955.8% when compared to the same quarter one year ago, falling from $2.60 million to -$22.24 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, Ruby Tuesday's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for Ruby Tuesday is currently extremely low, coming in at 13.85%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.67% is significantly below that of the industry average.
- Net operating cash flow has decreased to $8.86 million or 20.87% when compared to the same quarter last year. Despite a decrease in cash flow of 20.87%, Ruby Tuesday is still significantly exceeding the industry average of -78.67%.
- You can view the full analysis from the report here: RT Ratings Report