Casual-dining restaurant Ruby Tuesday (NYSE:RI) appears to have a full plate for its 2007 third-quarter report, which rolls out tomorrow.

What analysts say:

  • Buy, sell, or waffle? With 14 analysts still covering the restaurant, we find one more moving toward a rosy outlook. Five analysts say buy, seven say hold, and two are still holding out for dessert with a sell.
  • Revenues. Revenues are forecast to rise 12% to $378.4 million.
  • Earnings. Profits, on the other hand, are expected to climb just 6% to $0.53 per share.

What management says:
Although founder and CEO Sandy Beall says Ruby Tuesday's "burger-centric strategy" is beginning to sizzle, the company has a way to go in proving that same restaurant sales are chillin' and grillin'. Comps -- which measure sales at restaurants open for 19 months or more -- were essentially flat in the second quarter at company-owned stores, while they were up 4% for franchised operations. Sounds yummy, but the company also forecast flat to slightly increased comps for the third quarter, despite same-restaurant sales for December that climbed 2% and 6%, respectively. That result suggests that January and February didn't come in too strong.

What management does:
Ruby Tuesday's goal is to increase comps at a rate of 3% to 5% a year and to increase average restaurant volumes by $100,000 a year until they each are operating at around $2.5 million in sales annually. That's the long-term goal. But sales at company-owned restaurants rose 14% last quarter, primarily because of the opening of new stores while franchise restaurant revenues were up just 2% from a year ago. Expanding the store base can be important for growth, but it needs to be able to get customers to come back in larger numbers. Otherwise, the 4% decrease in profits experienced in the second quarter will continue to plague the chain.

Margin

11/05

02/06

05/06

08/06

11/06

Gross

42.8%

43.0%

43.3%

43.4%

43.3%

Operating

12.1%

12.2%

12.8%

12.7%

12.7%

Net

7.8%

7.7%

7.7%

7.5%

7.3%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
We're not saying goodbye to Ruby Tuesday just yet. The casual-dining experience is having a difficult time across the board. Applebee's (NASDAQ:APPB) reported a difficult quarter with declining comps, sales, and profits, while Outback Steakhouse's parent, OSI Restaurants (NYSE:OSI), has been in a state of flux for awhile now.

Part of the problem is concern over declining comps. Restaurants including Darden (NYSE:DRI), Brinker (NYSE:EAT) and Ruby Tuesday, among others, have had to engage in a series of aggressive discount programs to try to lure patrons back even while these companies are experiencing higher costs. Since it's an industrywide issue, not one facing the red weekday alone, I'd say that the discount Ruby's is trading at makes the buyback program it has implemented a smart move.

Related Foolishness:

Ruby Tuesday has earned a one-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock-rating service by joining today. It's free!

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.