Ruby Tuesday (NYSE:RT) will release its quarterly report on Wednesday, and investors are bracing for more potential bad news ahead. Even though the entire casual-dining industry has suffered through tough times in recent years, rivals Darden Restaurants (NYSE:DRI) and Red Robin Gourmet Burgers (NASDAQ:RRGB) have managed to set the stage for near-term future sales growth. By contrast, Ruby Tuesday continues to struggle to right its ship amid troubling trends that show few signs of reversing themselves anytime soon.

Casual-dining chains have generally had to deal with a tough competitive environment in recent years, as a sluggish recovery for Main Street America has left dining customers with less discretionary income to spend eating out. Yet even as Darden and Red Robin have found growth concepts that have succeeded in at least softening the blow of adverse conditions, Ruby Tuesday has had far less luck, and investors have very low expectations for anything other than continued plunges in sales and more net losses. What will it take to turn Ruby Tuesday around? Let's take an early look at what's been happening with Ruby Tuesday over the past quarter and what we're likely to see in its report.

Stats on Ruby Tuesday

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$271.93 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can Ruby Tuesday earnings recover this quarter?
Analysts have remained gloomy in recent months about the prospects for Ruby Tuesday earnings. They've widened their loss estimates for the November quarter by more than $0.15 per share, and they've reversed initial calls for modest profits in fiscal 2014 and 2015 with losses. The stock has kept dropping, with losses of another 16% since early October.

Ruby Tuesday's August-quarter results painted a dire picture of the restaurant chain's financial condition. Revenue dropped 11.7%, with same-store sales declining 8.4% for franchise locations and 11.4% for company-owned restaurants. CEO J.J. Buettgen blamed the economy, yet Darden's same-store sales results didn't fall nearly as much, and Red Robin actually posted solid growth for its comps in the comparable quarter. With the company's cash balance falling below $36 million, Ruby Tuesday's performance has inspired some investors to raise some early concerns about whether liquidity could eventually become a more pressing problem for the restaurant chain.

One cause for Ruby Tuesday's woes has simply been bad timing. Going into the recession, the chain had hoped to appeal to a more upscale audience, but when disposable income dried up among its customers, Ruby Tuesday found itself on the wrong end of the value spectrum. More recently, Ruby Tuesday has reversed course, appealing to value-conscious diners right at the time when many are just starting to feel the positive impacts of the economic expansion. Darden and Red Robin have largely avoided those missteps, finding their niches and serving them consistently throughout the economic cycle.

In November, Ruby Tuesday announced some organizational changes designed to cut costs as part of a broader "brand transformation strategy." Yet with two executives at the restaurant chain having left Ruby Tuesday during the quarter, it's unclear whether management has the internal backing of its key employees to execute a dramatic turnaround strategy.

In the Ruby Tuesday earnings report, watch to see if the company gives any further details on its reported hiring of consultants to explore strategic alternatives, including perhaps going private. At this point, a reasonable going-private offer might be shareholders' best exit strategy from the struggling restaurateur.

Click here to add Ruby Tuesday to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.