Ruby Tuesday, Inc. (Public, NYSE:RT) hit a new 52-week low today falling just under $15 a share. Despite their latest efforts to lower lunch specials and other menu items investors are not amused and the selling continues.
In the last six months shares of Ruby have fallen 44% and after reporting Q1 income falling 49% last week, everyone is selling shares. A year ago shares of Ruby traded in the high $20's and even peaked over $30, that's not case today.
Ruby Tuesday's Q1 net income declined to $11.1 million, or 21 cents per share, from $21.6 million, or 37 cents per share, in the year-ago period. The recent quarter's results included costs of 5 cents per share for the company's remodel initiative.
The company had about 52.4 million shares outstanding in the recent quarter, compared with 58.5 million in the year-ago quarter.
Revenue inched up 2% to $346.8 million from $338.7 million. The Street expected earnings per share of 22 cents on revenue of $345.3 million.
Chief Executive and Founder Sandy Beall said, "We are disappointed with our performance ... Our immediate challenge is to respond to the current sales environment with a much stronger value and promotion strategy that we will start in the second week of October."
Well that's all fine and dandy but what you should do is apologize to the shareholders for taking their money and running. Same-restaurant sales at Ruby Tuesday restaurants decreased 4.8% last quarter and with a lowered fiscal 2008 earnings guidance, what hope is there?
Not much, for now. Most major restaurants chains are hurting the sector is down almost 5% in the last three months. Despite how much you may hate Ruby's stock right now, this company will comeback, and with a P/E of 11.04 I would expect to see this stock bounce in the coming weeks. Folks shares of Ruby's are now at $15 and with the sector slowing down we may even see $11 a share.
Besides, Ruby Tuesday is set to open six outlets in Egypt, that should lift sales if people their actually like their food otherwise, it's a bust. Ruby's CEO gave specific reasons why their sales are soft on the last earnings call:
- Ruby Tuesday is the smallest of its competitors and is lower in top-of-mind recognition.
- The economy is driving lower income guests to fast food restaurants, to competitors with lower prices or to eat at home more often.
Ruby Tuesday has not been competitive with value advertising like its contemporaries.
- Some customers may have been driven away by inconvenience caused during the remodel.
That last reason by the CEO is almost as bad when I was in 6th grade and told my teacher my dog ate my homework. I swear he did. The only thing that Ruby's has going for them right now is their P/E is getting lower thanks to their shrinking share price. Take The Cheesecake Factory Incorporated 
(NASDAQ:CAKE) its P/E is 22.32 with shares at $23.44 or the darling of the industry Chipotle Mexican Grill, Inc. (NYSE:CMG) its P/E is 74.51 and shares at $124.40 (thanks to Cramer for slamming them the other day). We all know the restaurant business is very risky, but if the company has made it this far they can survive. The Masters recommend letting Ruby's shares fall to $13 before you think about buying, there could be some nice dip action in the coming weeks. As much as everyone hates Ruby Tuesday's the market will forgive them a few months from now or they'll get bought out by a bigger player. Or you could just put all your money in Chipotle and watch the short players ruin your 401(k).
Article by Frank Lara Jr.
Co-Founder of TheStockMasters.com
The Stockmasters Master Picks newsletter has been kicking ass and taking names for the past year. Our new publication comes out on Monday (10/15) and we'll be cashing out the following stocks for some easy and quick gains:
Activision, Inc. (ATVI) is up almost 20% since April 2007.
Service Corp. International (SCI) is up 43% since our first newsletter back in October 2006.
March 2007 we said buy Halliburton Company(HAL), it’s up more than 25% since then.
Blockbuster Inc. (BBI) has gone up 36% since we told you to buy back in June 2007.
The Masters don't play when it comes to their money our your's for that matter.
Our Original newsletter that has enlightened our our subscribers for over a year. It contains What to Buy, What to Sell, and Market Commentary. We've had impressive returns, great feedback, and in turn have already created a unique following of thousands of Stockmasters, on sale at WallStNewsletters.com. for only $45 a year. That's cheaper than a round of beers and an order of hot wings for your crew. Why not have more money in your pocket for beers and wings?
-
