Ruby Tuesday (RT) Bombs on Poor Earnings

NEW YORK (TheStreet) -- Ruby Tuesday (RT) has plummeted 17.8% to $6.21, as of 10:10 a.m. New York time, after reporting disappointing first-quarter figures after the bell on Wednesday. So far, 1.9 million shares have changed hands, exceeding its three-month average daily trading volume of 345,820 shares. 

For 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. Net operating loss was $21.9 million, compared to a net income of $3.1 million in the year-ago quarter.

"The first quarter was challenging as the overall economy failed to realize any significant improvements," said President and CEO JJ Buettgen in a statement. "Looking ahead to the remainder of fiscal 2014, our top priorities are driving increased guest counts and profitable sales growth."

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 Inc as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate Ruby Tuesday Inc (RT) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that RT's debt-to-equity ratio is low, the quick ratio, which is currently 0.56, displays a potential problem in covering short-term cash needs.
  • RT, with its decline in revenue, underperformed when compared the industry average of 4.6%. Since the same quarter one year prior, revenues fell by 11.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, RT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The gross profit margin for RUBY TUESDAY INC is currently extremely low, coming in at 13.39%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.21% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $20.5 million or 43.39% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Written by Keris Alison Lahiff.