Quarterly Highlights Include:
MARYVILLE, Tenn.--(BUSINESS WIRE)--Ruby Tuesday, Inc. (NYSE: RT) today reported financial results for the fiscal third quarter ended February 28, 2012.
Results for the third quarter of 2012 compared to the third quarter of 2011 include:
Sandy Beall, Founder, Chairman, and CEO, commented on the quarterly results, saying, "We believe the steps we have taken this quarter will enable us to positively impact our future sales and profits. While we were pleased with our earnings performance given our lower sales levels, we are clearly disappointed in our same-restaurant sales results for the third quarter. The promotional environment continues to be very competitive and over the past several quarters we have not competed well with the heavy television advertising levels of our peers. However, we feel good about our marketing strategy going forward which will include a higher percentage of our system being covered by television advertising communicating a strong value proposition to our guests, thus enabling us to grow our sales and traffic.
"From a growth standpoint, we are very excited about our upcoming acquisition of the Lime Fresh Mexican Grill brand as it aligns well with the Ruby Tuesday focus on fresh, high-quality ingredients and is well positioned in the fast casual sector as it offers a combination of the best of casual dining and fast casual. We believe this brand has significant growth potential given its low capital requirements and strong EBITDA margin potential and we tentatively have plans to add 20 Lime locations in Fiscal 2013 and 30 in Fiscal 2014. Additionally, we are very excited that John Kunkel, Lime's founder, will be joining our Board of Directors following completion of the acquisition. John's entrepreneurial background, strong operations experience, and in-depth knowledge of the fast casual sector will be instrumental to us as we grow the Lime brand in the future."
Other highlights from our third quarter results include:
Mr. Beall added, "As we begin the final quarter of this fiscal year, improving sales and traffic at Ruby Tuesday is our number one priority. A key ingredient of this turnaround is the launch of our television advertising campaign which will put us on a more competitive level with our peer group in terms of marketing dollars. On February 29th, we increased our television coverage from approximately 20% to approximately 50% of our restaurants and are now promoting our Fresh Endless Garden Bar and fresh-baked garlic cheese biscuits both complimentary with over 30 entrees starting at $9.99. Additionally, we have plans to increase our television coverage to 100% of the system in mid April by leveraging a combination of network and local cable to support a pure value and quality ad. While the results from television advertising take time to build, we are pleased with our improving March same-restaurant sales trends, driven by our television markets, while we reduce our coupon and promotion expense, and believe that our focus on value promoted by television advertising should enable us to increase our core traffic and same-restaurant sales over time.
"We continue to be focused on controlling our costs and have made significant progress in both identifying and implementing cost-savings initiatives. Our annualized savings discussed last quarter, which are primarily in the areas of procurement, occupancy, and maintenance, are now estimated in the range of $35-$40 million, or approximately $20 million higher than our previous estimates. The majority of these savings will be reinvested into our marketing programs. Additionally, we plan to close 25 to 27 underperforming restaurants during our fourth quarter, which should lead to estimated annual incremental EBITDA of approximately $1.5-$2.0 million in addition to a slight same-restaurant sales improvement.
"Finally, we remain focused on maximizing our free cash flow levels through our sales building and profit improvement plans. We continue to execute on our sale leaseback strategy and to date have closed on the sale of nine locations, resulting in gross proceeds of approximately $19.8 million. We continue to receive a high degree of interest from numerous buyers and anticipate closing on the remaining approximately $30 million of sale leaseback proceeds by the end of the first quarter of our next fiscal year. In addition to sale leaseback proceeds, we will continue to assess other debt financing options which could provide us with additional balance sheet flexibility to grow and create value for our shareholders."
In closing, Mr. Beall said, "We have made a number of key decisions this year to strategically position us for the future including: identifying costs savings to help fund our television advertising, ramping up our marketing efforts to be more competitive with our peers, closing certain underperforming restaurants, completing a series of sale-leaseback transactions to validate our overall real estate value, and acquiring Lime Fresh Mexican Grill. While we are humbled by our sales and profit results this year, we are very excited about the future of Ruby Tuesday as we have solid plans that should allow us to leverage our strong free cash flow and balance sheet flexibility to grow our business and create value for our shareholders."
Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 45 states, the District of Columbia, 14 foreign countries, and Guam. As of February 28, 2012, the Company owned and operated 740 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii and Guam) operated 39 and 46 Ruby Tuesday restaurants, respectively. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RT).
The Company will host a conference call, which will be a live web-cast, this afternoon at 5:00 p.m. Eastern Time. The call will be available live at the following websites:
http://www.rubytuesday.com
http://www.earnings.com
This press release contains various forward-looking statements, which represent our expectations or beliefs concerning future events, including one or more of the following: future financial performance and restaurant growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayments of debt, availability of debt financing on terms attractive to the Company, payment of dividends, stock repurchases, restaurant acquisitions, and conversions of Company-owned restaurants to other dining concepts. We caution the reader that a number of important factors and uncertainties could, individually or in the aggregate, cause our actual results to differ materially from those included in the forward-looking statements (such statements include, but are not limited to, statements relating to cost savings that we estimate may result from any programs we implement, our estimates of future capital spending and free cash flow, and our targets for annual growth in same-restaurant sales and average annual sales per restaurant), including, without limitation, the following: general economic conditions; changes in promotional, couponing and advertising strategies; changes in our guests' disposable income; consumer spending trends and habits; increased competition in the restaurant market; laws and regulations affecting labor and employee benefit costs, including further potential increases in state and federally mandated minimum wages, and healthcare reform; guests' acceptance of changes in menu items; guests' acceptance of our development prototypes, remodeled restaurants, and conversion strategy; mall-traffic trends; changes in the availability and cost of capital; weather conditions in the regions in which Company-owned and franchised restaurants are operated; costs and availability of food and beverage inventory; our ability to attract and retain qualified managers, franchisees and team members; impact of adoption of new accounting standards; impact of food-borne illnesses resulting from an outbreak at either Ruby Tuesday or other restaurant concepts; effects of actual or threatened future terrorist attacks in the United States; and significant fluctuations in energy prices.
RUBY TUESDAY, INC.Financial Results For the Third Quarter of Fiscal Year 2012(Amounts in thousands except per share amounts)(Unaudited)
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Our Company-owned and operated restaurants are concentrated primarily in the Southeast, Northeast, Mid-Atlantic, and Midwest of the United States, which we consider to be our core markets.