Shares of Ruby Tuesday Inc. ($RT) closed ahead by more than 4 percent in Wednesday action ahead of the company’s earnings report that was to be delivered after the closing bell. Those betting up missed the mark as the company unexpectedly served up a bigger-than-expected net loss in the fiscal first quarter on slumping same-store sales and write-downs.
For the quarter ended September 3, the restaurant operator reported revenue of $289.67 million, down 12 percent from $327.92 million in the year prior quarter. Net loss for the quarter was $22.2 million, or 37 cents per share, versus a net profit in the first quarter last year of $2.6 million, or 4 cents per share.
Wall Street was expecting a net loss, but only of 5 cents per share on revenue of $298 million.
Same-restaurant sales, which compare sales at stores open more than one year, decreased by 11.4 percent at corporate-owned locations and 8.4 percent at domestic franchise restaurants.
The Maryville, Tennessee-based company also recorded $7.5 million in pre-tax impairment charges and lease reserves related to underperforming or closed locations. During the quarter, Ruby Tuesday closed three corporate-owned stores.
Saying he remained confident going forward, president and chief executive JJ Buettgen said in a statement, “The first quarter was challenging as the overall economy failed to realize any significant improvements which adversely affected us and the casual dining industry. We are disappointed that our first quarter same-restaurant sales came in below our expectations.
Buettgen, who was appointed as CEO about one year ago, has been working on turning the company around, including changing the menu to include new pretzel burgers and flatbreads for better customer value, shifting marketing schemes and divesting non-core assets, such as Marlin & Ray’s and Wok Hay.
The company has engaged a leading enterprise improvement consulting firm to help with its cost-cutting measures, according to Buettgen, and is focused on driving increased guest count and profitable sales growth.
For the full fiscal 2014 year, the company sees same-store sales to drop in the high single digits in the second quarter, but improve sequentially in the third and fourth quarters, including growth in the fourth quarter. Ruby Tuesday also expects to generate between $10 million and $15 million this year from selling excess real estate.
Buettgen’s confidence did not inspire investors, with shares dropping to $6.52 in extended trading after closing the regular session at $7.55. Through Wednesday’s close, shares were down about 4 percent in 2013.