Ruby Tuesday shares plummet on disappointing sales, restaurant closures

Ruby Tuesday


Ruby Tuesday
Source: Ruby Tuesday
Ruby Tuesday shares dropped 12 percent on Friday after the company posted weak same-store sales for the fiscal fourth quarter and reported that it would shutter 13 percent of its restaurants.
Same-store sales for the Tennessee-based restaurant operator fell 3.7 percent, worse that the 1.7 percent decline in the year-ago quarter. Traffic dropped 4.6 percent in the quarter, according to the company.
"Our fourth quarter was impacted by softness in the casual dining industry and increased promotional activity by our peers," J.J. Buettgen, CEO of Ruby Tuesday, said in a statement. "Given that we expect the macro environment to remain challenging for some time, we are taking the necessary steps to change the trajectory of our business."
The company is expected to shutter 95 "underperforming" restaurants by September. Ruby Tuesday currently has 724 restaurants, of which 646 are company-owned. Buettgen called the closures a "difficult but necessary step" to improve performance of the brand.
"There's a line of thought that to some degree people are concerned about global issues around kind of the state of country, election issues, those type of things," Buettgen said during an earnings conference call Thursday. "Also I think you've seen a lot around, potentially the relative gap in food away from home versus food at home in terms of grocery inflation in restaurants."
Buettgen isn't alone in his commentary. Both McDonald's and Wendy'salso blamed November's election for poor restaurant sales.
Alton Stump, an analyst at Longbow Research, said he remains neutral on Ruby Tuesday's stock because of the company's disappointing fiscal fourth-quarter results.
"We are concerned [Ruby Tuesday] has been unable to drive meaningful new product success over the last 24+ months, in contrast to the company's successful innovation cycle during mid/late calendar 2013," Stump said in a research note.
A Ruby Tuesday spokeswoman declined CNBC's request for comment, citing its desire to be sensitive to the employees and guests who will be impacted by the company's decisions.

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