Ruby Tuesday looks to boost brand perception

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Guidance revised

Beall and members of his executive team also relayed to analysts their confidence in the company’s fledgling conversion program to the Marlin & Ray’s full-service seafood concept and development of the licensed fast-casual Lime Fresh Mexican Grill concept.

However, Beall, citing the recent sales experiences at Ruby Tuesday and other casual-dining companies, acknowledged that the company was being more conservative about the back half of fiscal 2012 than it might have been a few months back.

Reflecting that new sensibility, Ruby Tuesday modified its fiscal 2012 guidance. It now anticipates same-store sales at company restaurants to be down 2 percent to 4 percent for the year, versus earlier predictions of flat to down by 2 percent.

The company said it now expected full-year earnings per share to fall within the 55 cents to 65 cents range, compared with the earlier forecasted range of 60 cents to 75 cents per share. It said that adjustment was due chiefly to year-over-year increases in advertising and interest expense.

Unit development and conversions

Related to new-store development, Ruby Tuesday officials noted they now expect to close five to seven company-owned restaurants in 2012, compared with previous guidance of three to five closures. The chain now plans to convert eight to 10 restaurants, versus the six to eight, as previously anticipated. It also will open one high-end Truffles Grill, and continues to anticipate opening a total of six to eight Lime Fresh restaurants.

The company said it now expects to close 15 to 17 franchised restaurants during the year, versus an earlier target of 14 to 16, with as many as 14 of those in international settings, including nine closings in India, where the company cancelled a franchising agreement.

Beall said Ruby Tuesday is encouraged by early results from conversion opportunities, and Marlin & Ray’s is showing potential as a stand-alone concept in addition to creating a halo effect at nearby Ruby Tuesdays, where there have been sales increases.

The company has been identifying and securing in-line development leases for Lime Fresh and is looking to open another 15 locations in the next fiscal year, Beall said.

“We think investing in growth within the high quality fast-casual segment is the right thing to do, and we look forward to growing Lime,” he said.

Balance sheet maneuvering

The company has identified at least $15 million to $20 million in savings from its cost savings initiatives to fund additional marketing dollars, Beall said.

Though just one transaction was completed during the second quarter, he said the company believes “we have a significant opportunity to strengthen our balance sheet with up to $150 million in [real estate] sale-leaseback proceeds in the future in order to invest in growth, opportunistic share repurchase and lower our debt levels.”

“We remain focused on maximizing our strong free cash flow in an effort to create additional cash and financial flexibility,” Beall said. “We’re pleased with our progress we’re making in monetizing some of this real estate.”

Contact Alan J. Liddle at alan.liddle@nrn.com.
Follow him on Twitter: @AJ_NRN