Neighborhood chain restaurant Ruby Tuesday (NYSE: RT) whiffed big time on its recent earnings announcement. Though in the midst of an overhaul -- one that was thought to be improving steadily -- the fast-casual dining restaurant posted a loss of $0.37 per share, which was a far cry from Wall Street's estimates. Coupled with more disheartening figures for the past three months, investors and analysts promptly sold off the stock, dragging the price down more than 16% in Thursday's trading. The question going forward is if Ruby Tuesday's woes are a matter of macroeconomic headwinds keeping patrons away, or if the company's aforementioned recovery is falling flat.

Earnings recap
For the fiscal first quarter, Ruby Tuesday's saw its net income plummet to a loss of $22.2 million, or $0.37 per share. In the year ago quarter, the company was able to turn a profit of $2.6 million. The Street was expecting a much smaller loss of just $0.05 per share. Revenue fell less -- down 11% year over year.

Perhaps the most troubling figure to come from the company was the more than 11% drop in same-store sales for company-owned stores. Clearly, the company is having difficulty getting people in the doors. Meanwhile, franchised stores saw an 8.4% decline.

Looking ahead, the company expects same-store sales to again trend down in the high single digits, giving investors no hope of quick improvement. Management didn't cite internal factors, but blamed the lack of performance on the poor consumer-spending environment.

Retail and restaurants can be hit especially hard by short-term weakness, which sometimes presents opportunity to the value-seeking investor. But with a lack of visibility looking ahead, it's hard to say whether the freshly trimmed stock price provides investors with an attractive value proposition.

Caution ahead
Ruby Tuesday's market cap is under $370 million, and the company has nearly $270 million in debt. Looking ahead, management sees those rough same-store sales figures turning positive by the end of the fiscal year as a result of ongoing restaurant renovations. The company is spending $30-$40 million in capital expenditures this year.

With less than $36 million in cash, the company may have to fund its improvements with its new credit facility. Liquidity is not necessarily a concern here, especially with $10-$15 million in real estate sales coming in, but the balance sheet overall does little to comfort the murky operating business.

At this point, investors would be wise to steer clear of Ruby Tuesday.

 

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Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.