NEW YORK ( TheStreet) -- Shares of Ruby Tuesday ( RT) were reeling Thursday after the casual restaurant operator reported disappointing quarterly results because of flagging same-store sales. The Maryville, Tenn.-based company cited a tight promotional environment as part of the reason for the weak numbers, saying it hasn't matched the television advertising efforts of its competitors. In an effort to turn things around, Ruby Tuesday plans to close 25 to 27 underperforming stores in the fourth quarter and increase the coverage of its own television advertising campaign. The company has also inked a deal to acquire Lime Fresh Mexican Grill for $24 million.
The stock was down nearly 17% to $7.41 in afternoon trades on volume of 2.5 million, more than five times the issue's trailing three-month daily average. . After Wednesday's close, Ruby Tuesday reported earnings of $4.5 million, or 7 cents a share, down from year-earlier earnings of $16 million, or 25 cents a share. Revenue came in at $324.8 million, up slightly from last year's total of $319.1 million. Same-store sales fell 5% at company-owned locations. The latest quarter includes 11 cents a share in impairment costs related to the planned restaurant closings. The average estimate of analysts polled by Thomson Reuters was for a profit of 16 cents a share in the February-ended period on revenue of $339 million. "We believe the steps we have taken this quarter will enable us to positively impact our future sales and profits," CEO Sandy Beall said in a statement. "While we were pleased with our earnings performance given our lower sales levels, we are clearly disappointed in our same-restaurant sales results for the third quarter." Bank of America Merrill Lynch kept an underperform rating and a $7 price target on Ruby Tuesday in the wake of the news, saying "the recent results raise the risk of a prolonged transition period with little visibility on longer term strategy." The firm, which was expecting same-store sales to dip just 1% in the quarter, also noted that Ruby Tuesday once again reduced its full-year earnings outlook to a profit of 43 to 48 cents a share, excluding items. Wall Street's current consensus estimate is for a profit of 57 cents a share.