Bear of the Day: Ruby Tuesday (RT) - Bear of the Day
October 25 2013 - 6:30AM
Zacks
Ruby Tuesday's (RT) turnaround is going to take a while
longer. This Zacks Rank #5 (Strong Sell) struggled in the recent
quarter and is now expected to lose money in fiscal 2014.
Ruby Tuesday operates 778 company-owned or
franchise Ruby Tuesday brand restaurants in 45 states, DC, Guam and
11 other countries.
Big Miss in the Fiscal First Quarter
On Oct 9, Ruby Tuesday reported its fiscal first
quarter 2014 earnings. It was coming off of a big miss in the prior
quarter and is in the midst of a turnaround.
The turnaround appears to be postponed. Ruby
Tuesday missed the Zacks Consensus Estimate by 21 cents. Earnings
were -$0.26 compared to the consensus of -$0.05.
Same-restaurant sales fell 11.4% at company-owned
restaurants and 8.4% at franchise restaurants. This was below the
company's expectations.
The company said that the quarter was challenging
due to the failure of the economy to improve.
It is doing a core menu transformation to spice
things up and has already added pretzel burgers and flatbreads.
Fiscal 2014 will be Challenging
Ruby Tuesday has stopped giving forward earnings
guidance while it conducts this turnaround but it does anticipate
same-restaurant sales to be down high single digits in the second
quarter with sequential improvement in the third and fourth
quarter.
Same-restaurant sales are expected to be positive
by the fourth quarter, however.
Earnings Estimates Slide
With the big miss and the lackluster guidance, the
analysts lowered both fiscal 2014 and fiscal 2015 estimates.
Zacks fiscal 2014 estimate plunged to -$0.48 from
$0.14 just 90 days before. It is an earnings decline of 308% from
fiscal 2013.
While the loss is expected to be less in fiscal
2015, the analysts still see -$0.07 in 2015.
Shares At 1-Year Lows
Investors sold off the shares on the earnings miss.
Shares have hit a 1-year low.
![](http://static.zacks.com/images/zacks/blogs/1382650245_scaled_425.jpg)
The Zacks Rank is a short-term recommendation. Ruby
Tuesday has a longer term turnaround plan. Still, with sales
expected to be weak over the next few quarters, the turnaround in
the shares is probably not going to be imminent.
In the casual dining sector, investors might want
to consider Red Robin Gourmet Burger (RRGB), a Zacks Rank #1
(Strong Buy), or Bob Evans Farms Inc. (BOBE), a Zacks Rank
#2 (Buy), as alternatives.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com.
She is also the Editor of the Turnaround Trader and Value Investor
services. You can follow her on twitter at @TraceyRyniec.
BOB EVANS FARMS (BOBE): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
RUBY TUESDAY (RT): Free Stock Analysis Report
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