Ruby Tuesday Inc.’s (RT) adjusted loss of 7 cents per share in the second quarter of 2013 matched the Zacks Consensus Estimate but was wider than the year-ago loss of 3 cents per share. Lower sales especially in the latter part of the quarter along with higher maintenance expenses hurt adjusted earnings.
Revenues in the quarter slipped 1.0% year over year to $304.2 million. However, revenue beat the Zacks Consensus Estimate of $303.0 million.
The year-over-year downside in revenue was due to permanent closure of 29 company-owned Ruby Tuesday units in the quarter, which fully offset the positive impact of same restaurant sales increase at Ruby Tuesday concept and unit growth at Lime Fresh and Marlin & Ray's.
Behind the Headline Numbers
The casual dining restaurant operator posted a 0.3% upside in comparable store sales at company-owned restaurants while its franchised division saw 0.2% expansion in comps.
Restaurant level operating margin enhanced 170 basis points (bps) year over year to 16.1% attributable to a downside in payroll and related expenses and cost of goods sold, partially offset by an increase in other operating costs and depreciation.
Alongside benefiting margins, efficient cost containment coupled with lower coupon expenses is also financing the company’s television marketing programs to some extent.
Store Update
During the quarter, the company opened two Lime Fresh company-owned restaurants. It also shut down two company-owned Ruby Tuesday stores. Domestic and international franchisees opened one and closed two Ruby Tuesday outlets.
The company also plans to open 10???12 Lime Fresh restaurants and close two Lime Fresh restaurants, 13 Marlin & Ray’s restaurants, one Wok Hay restaurant, six to eight Company-owned Ruby Tuesday restaurants as well as sell two Truffles Grill restaurants, in 2013. The company’s decision for the massive divesture is intended to attain optimum capital allocation.
Liquidity
Ruby Tuesday ended the quarter with cash and short-term investments of $25.6 million, up from the year-ago cash balance of $9.0 million. Total book-debt of $309.0 million was also down year over year by around $33.0 million.
Share Repurchase
he company bought back 2.4 million shares of common stock during the quarter under review at an average price of $7.33 per share. Following the quarter end, the restaurateur repurchased an additional 400 thousand shares at an average price of $7.91.
On January 8, 2013, Ruby’s board expanded the share repurchase authorization by 10 million shares, resulting in 12.7 million shares available for repurchase at present.
Outlook