Ruby Tuesday Needs Better Tricks Than This to Survive

The casual-dining chain is singing the same song investors have heard before.

Apr 23, 2014 at 11:00AM

Source: Ruby Tuesday.

Tell me if you've heard this one before. Restaurant operator Ruby Tuesday (NYSE:RT) is really going to turn things around this time because it's going to change up its menu while shedding underperforming stores, which will drive same-restaurant sales higher. Comps may still be negative now, but they're starting to head in the right direction. All it needs is just a little more time to set things right.

You'll be forgiven if you think that sounds familiar, because it's essentially the same story the casual-dining chain has been spinning for the past few years. In fact, it said back in late 2012 that after finally achieving positive same-restaurant sales -- the first time in almost two years that it had done so -- it was a result of its new menu and new marketing, which it would use to continue driving comps higher. Yet they soon collapsed, once again.

Screen Shot

Source: Ruby Tuesday SEC filings.

As the above charts show, we've heard this refrain before. Ruby Tuesday has been rationalizing its store base, both company-owned and franchised, for a while; yet, despite new menus, regardless of whether one new concept chain has been swapped out for another -- Marlin & Ray's, Wok Hay, and Truffles Grill were seen as holding high-growth potential, but ended up cannibalizing its Lime Fresh Mexican Grill so they were killed off -- same-restaurant sales remain in negative territory.

There are things Ruby Tuesday needs to do if it wants to do more than simply limp along, but investors needn't go along for the ride until management proves it can translate its words into deeds. Last week, it reported a 3.8% drop in revenues to $295.6 million from $307.4 million in the year-ago period, generating a loss of $7.4 million, or $0.12 per share, down from a profit of $2.2 million, or $0.04 a share. It forecast that comps would be in a range between down 1% once again to up 1%, which would be a change of pace; but we've seen these temporary blips before, too.

The larger problem is the decline in dining itself as the economy grinds down consumers. While Black Box Intelligence and People Report say the industry in March enjoyed its first monthly increase in same-store sales since November, with comps up 2% during a two-year period, it also says traffic fell for the month, down 1.2%. This indicates that the gains the restaurants are making are coming from higher average tickets due to higher prices, and not because there's a real groundswell of pent-up dining demand.

The casual-dining segment is in real trouble, which is why Ruby Tuesday is traveling the well-worn path into fast-casual. Yet with only 28 stores total for its Lime Fresh Mexican Grill concept, there's not nearly enough critical mass to change its overall direction. (And can it be any more transparent in trying to copy the segment's niche leader?)

The stock is up 6% during the past month, but we may be just hearing Ruby Tuesday singing the blues again next quarter. Investors should be wary of buying into this perennial turnaround story.

Would Warren Buffett invest in Ruby Tuesday?
Warren Buffett has made billions through his investing, and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Rich Duprey 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers