Casual-dining restaurant chain Ruby Tuesday (NYSE:RI) will release its second-quarter 2007 results on Tuesday, Jan. 9. Will it be feast or famine?

What analysts say:

  • Buy, sell, or waffle? Some 14 analysts are at Ruby Tuesday's table, with eight saying hold, four rating it a buy, and two waiting to check out with a sell.
  • Revenues. Revenues are expected to ring in at $329.1 million, an 11.6% increase over last year.
  • Earnings. Profits, however, are expected to be flat at $0.28 per share.

What management says:
Ruby Tuesday's performance has really been anything but rosy, with same-restaurant sales flat or down for the past year in virtually every quarter except the third, and management is expecting more of the same this quarter. It forecast a flat to 2% rise in comps for the quarter and 1% to 2% growth for the year, which undershoots its stated goal of 3% to 5% growth. While it's opening a number of new restaurants, both here and abroad, it's only been able to achieve its revenue growth because it continuously opens new restaurants.

What management does:
As has been the case with Ruby Tuesday for a while now, higher food costs -- averaging around 27% of revenues -- have been eating into margins for the company. While management was required to begin expensing stock options, as every other company was required to do, this hasn't eaten away too much at profits, amounting to only $0.01 to $0.02 per share.

Margin %

09/05

12/05

03/06

06/06

09/06

Restaurant

43.1

37.1

50.5

43.3

43.4

Op.

12.7

12.1

12.2

12.8

12.7

Net

8.2

7.8

7.7

7.7

7.5

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:
Differentiating itself from the competition has been difficult for this restaurateur. Going into a Ruby Tuesday, a TGI Friday's, or an Applebee's (NASDAQ:APPB), it's pretty hard to tell where you are. Sure, the decor is different, but the menus are pretty much the same.

The company's expansion and marketing plans will certainly help raise the restaurant's profile, but luring customers back in on a consistent basis seems to be challenging for Ruby Tuesday, and it's been unable to meet its own targets. There are a lot of choices for consumers out there, and higher costs, including for fuel (though they've improved somewhat), will continue to impact customers' decisions. The company thinks "thousands" of Ruby Tuesdays could be operated across the country -- could these be the key to generating stronger same-restaurant sales, or will the strategy result in cannibalization that will just continue to sink comps further?

Competitors:

  • Darden Restaurants (NYSE:DRI)
  • Cheesecake Factory (NASDAQ:CAKE)
  • Champps Entertainment (NASDAQ:CMPP)
  • OSI Restaurants (NYSE:OSI)
  • Brinker International (NYSE:EAT)

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Ruby Tuesday is a one-star company at Motley Fool CAPS, the Fool's stock rating service. Join today to see why investors think this company is a cold plate of leftovers. It's free!

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