Things continue to grow worse for Ruby Tuesday (NYSE:RT) and its shareholders. Shares of the struggling restaurant chain plunged another 13% last week, fueled by the resignation of its CEO and the announcement of problematic preliminary financials results.
James J. Buettgen is out at Ruby Tuesday. F. Lane Cardwell Jr. is being tapped as interim CEO. It's not a bad choice for a replacement. Caldwell has been on the Ruby Tuesday board for four years, so he's up to speed with the challenges facing the chain. He has also held executive leadership positions at Eatzi's, Boston Market, P.F. Chang's, and Famous Dave's.
This is the second summer in a row that Ruby Tuesday lost a key executive. The chain's CFO left for greener pastures in June of last year. Given the chain's struggles, a change at the top isn't necessarily a bad thing. The problem here is that the casual dining chain also offered up weak initial results for its fiscal quarter ending last month.
Ruby Tuesday is checking in with just $256.7 million in revenue for its fiscal first quarter. That would be 8% below last year's results of $279.5 million, but to be fair this is a smaller and possibly more focused chain these days. It has closed down 95 of its underperforming stores, and it unloaded its Lime Fresh fast casual burrito chain for a pittance earlier this year.
Comps declined 2.7% at its restaurants for the quarter, but that also deserves an asterisk. Ruby Tuesday is no longer counting the same-restaurant sales from the eateries it shut down, and logic would suggest that those units were sandbagging store-level performance metrics.
Ruby Tuesday is targeting a chunky loss of $0.67 to $0.74 a share, but that includes costs related to its company-shrinking asset rationalization plan. It's still ultimately checking in with an adjusted loss that is larger than what the lone analyst still following the company is forecasting.
Ruby Tuesday is a casual dining concept that got its name from a classic Rolling Stones song. In retrospect there are many other songs by the iconic rock band that would be a better fit these days.
- "Beast of Burden"
- "Sympathy for the Devil"
- "(I Can't Get No) Satisfaction"
- "You Can't Always Get What You Want"
Just about the only Rolling Stones song that doesn't fit is "Time is on Your Side" because the clock is ticking to the chain's detriment. Restaurant concepts don't last forever, and Ruby Tuesday is in a bind. It has now posted annual deficits for four consecutive fiscal years, and it's off to another bad start in fiscal year 2017.
Ruby Tuesday is trying, but reinventing the menu and its decor isn't working. If even the more successful operators are struggling in the current climate -- forced to discount aggressively in order to compete with cheaper and faster fast casual concepts -- it's hard to give Ruby Tuesday much of a chance no matter what name is on the sign.