Here we are another quarter later, and Ruby Tuesday (NYSE:RI) still has its challenges. It's not unique in the restaurant trade in that regard -- the year has been tough on similar chains, too, such as O'Charley's (NASDAQ:CHUX), Applebee's (NASDAQ:APPB), and Champps Entertainment (NASDAQ:CMPP). But just because misery loves company, that doesn't mean Ruby's shareholders feel any better about a stock that's near its 52-week low.
With fiscal first-quarter results in the books now, perhaps things will start to get better. For the quarter that was, total revenue rose by more than 15% despite same-store sales falling 3.9% at company-owned locations. Management again cited the impact of coupon promotions, which they believe caused roughly a 5%-6% decline in same-store performance.
That sounds like an excuse, doesn't it? But I think there's something to this. First of all, same-store sales improved sequentially through the three months of the quarter. What's more, comp sales for September (which no longer includes those coupon promotions) were actually positive, despite a very poor start caused by the impact of Hurricane Katrina.
Ruby is also starting to see results from its decision to alter the menu toward a more burger-centric approach. Burgers represented about a third of sales in the quarter, up from roughly a quarter or so in the year-ago period. Now, burgers are certainly competitive in their own right (from the likes of Steak 'n Shake (NYSE:SNS) or Red Robin (NASDAQ:RRGB)), but people like them, and it's not nearly the sort of risk involved as if the company tried to duplicate, say, The Cheesecake Factory's (NASDAQ:CAKE) menu.
I'll be curious to see what this stock does over the next 12 months. Despite its operational flaws of late, the company still has a pretty good return on equity relative to the industry. The stock also happens to look cheapish according to metrics like P/E or enterprise value-to-EBITDA. Last but not least, the company is looking ahead to a year of easier comparisons, given that year-ago results were nailed by that ill-fated coupon promotion. So while the cash flow picture isn't so impressive to me, I can see how pieces may be falling into place for Ruby Tuesday to sparkle a bit more in the months to come.
For more restaurant Takes made to order:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
