Ruby Tuesday's fiscal Q1 earnings fell 75% to US$3.1M as sales rose 9% to US$330.3M; CEO blames results on 'aggressive competitive promotional environment' that is expected to continue

Cindy Allen

MARYVILLE, Tennessee , October 6, 2011 (Associated Press) – Restaurant operator Ruby Tuesday Inc. said Tuesday that its first-quarter net income fell 75 percent as it continues to struggle in a highly competitive market requiring increased advertising and promotions to attract money-conscious consumers.

The Maryville, Tenn.-based company posted net income of $3.1 million, or 5 cents per share, compared with $12.4 million, or 19 cents per share, a year ago.

The results included $1.7 million, or 2 cents per share, in accounting gains realized from franchise partner acquisitions.

Sales rose 9 percent to $330.3 million, while operating costs and expenses climbed 13.6 percent to $322.7 million.

Analysts surveyed by FactSet expected earnings of 6 cents per share on sales of $333.9 million.

Sales at company-owned restaurants open at least a year fell 4.1 percent and were affected in part by Hurricane Irene, which hammered the East Coast in August.

CEO Sandy Beall said the earnings results were within the range the company had anticipated, but sales were lower than expected.

"We continue to operate in an aggressive competitive promotional environment with very heavy advertising levels and we expect these competitive marketing trends to continue given the soft economy and low consumer confidence," Beall said in a statement.

The company is testing new menu items and promotions in an effort to boost sales.

No new company-owned restaurants were opened and two were permanently closed. Two others were temporarily closed to be converted to other concepts. Franchisees opened two new restaurants and closed three.

For 2012, the company said it expects earnings per share in the range of 60 cents to 75 cents. Analysts expect 76 cents.

The second-quarter estimate is for a net loss of between 4 cents per share and 8 cents due to lower sales at restaurants open at least a year and year-over-year increases in advertising and interest expense. Analysts expect a profit of 7 cents per share.

The company has restaurants in 45 states and 14 foreign countries.

Shares fell 13 cents, or 1.8 percent, to close at $7.16. They slid 46 cents in after-market trading.

Shares have traded between $6.56 and $15.57 in the past 52 weeks. Shares hit a peak in January but have slid more than 50 percent since then.

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