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Ruby Tuesday Goes Red

Steve Symington
October 10, 2013

There's nothing quite like swinging to a huge loss to spoil investors' appetites for your stock.

Image source: Wikimedia Commons. 

On Thursday, casual-dining chain Ruby Tuesday (NYSE: RT) did just that by reporting a quarterly net loss of $22.2 million, or $0.37 per diluted share, compared to a net income of $2.6 million, or $0.04 per share, in the same year-ago period.

Quarterly revenue also fell 11.7% year over year to $288.1 million.  

For reference, analysts on average were expecting a significantly smaller net loss of $0.06 per share on sales of $298.6 million.

Naturally, the big miss gave investors plenty of reason to crush the stock to the tune of 18% on Thursday.

Blame the economy...
If you're searching for a culprit, Ruby Tuesday CEO J.J. Buettgen said in a press release you should look no further than our faltering economy, which "failed to realize any significant improvements [and] adversely affected us and the casual dining industry."

As a result, Buettgen stated, same-restaurant sales came in well below the company's expectations, decreasing 11.4% at company-owned locations and 8.4% at domestic franchised restaurants.

What's more, Ruby Tuesday was left with just $35.9 million in cash at the end of last quarter, a more than 45% decrease from its cash balance this time last year. Perhaps it should come as no surprise, then, that the company says it is finalizing a new four-year, $50 million revolving credit facility to help keep it afloat, with an anticipated closing by the end of the current quarter.

I suppose that's fair enough. After all, shares of casual dining competitor Darden Restaurants (NYSE: DRI) also took a hit two weeks ago after it said same-restaurant sales for its two largest core concepts, Olive Garden and Red Lobster, respectively fell 4% and 5.2%. Of course, those drops weren't nearly as large as Ruby Tuesday endured, and Darden can at least fall back on its other (albeit smaller) fast-growing brands, including LongHorn Steakhouse, for which comps actually grew 3.2% last quarter.

Then again, not everyone in the casual-dining space has fared so badly of late. Take Red Robin Gourmet Burgers (NASDAQ: RRGB), for example, which popped 10% when it reported 4.3% same-store sales growth at company-owned restaurants in August, largely the result of intelligent price increases even in the face of slightly lower guest counts, which were down 0.7%.

Of course, Red Robin won't be able to keep raising prices forever, but it's telling that customers were largely willing to accept paying a higher check in the first place.

Buffalo Wild Wings (NASDAQ: BWLD) also bucked the negative trend last quarter by achieving positive comps at company-owned locations of 3.8%, benefiting not only from its unique, enjoyable atmosphere, but also from lower chicken wing prices and a