Is Ruby Tuesday Stock A Buy Post Its Q4 Earnings?

  • Ruby Tuesday earnings for Q4 2015 were reported after the market close on July 23, 2015.
  • The company missed analyst revenue estimates and also saw its topline decline by 3.4%, driven by closing down of ten unprofitable company-owned restaurants.
  • The company also saw a improvement in profitability, reporting its smallest annual loss since 2012 in Fiscal 2015.
Ruby Tuesday Earnings Q4 2015

Ruby Tuesday (NYSE:RT) announced its Q4 2015 results after the market close on Thursday, July 23, 2015. Fiscal fourth-quarter sales were $296.8 million, down 3.4% from $307.3 million last year and falling short of analyst expectations of $302.35 million.

Same-restaurant sales declined 1.7% for company-owned restaurants. Year-over-year guest count for same-restaurants fell 4.6% for the quarter. This was due in part to the reduction of ten company-owned restaurants.

In spite of lower sales, Net Income from Continuing Operations was $4.3 million or $0.07 per diluted share, rebounding from a loss of $881,000 or $0.01 per diluted share in the same quarter last year. Earnings, adjusted for non-recurring and asset impairment costs, were $7.2 million or $0.12 per diluted share vs. $3.5 million or $0.06 per diluted share in the year ago quarter.

The market's reaction to the Ruby Tuesday earnings announcement was minimal. Ruby Tuesday stock was up $0.05 per share in after-hours trading as of 5:30 pm Eastern time.

Results for Fiscal 2015 show the bigger picture. Net losses fell to $3.2 million vs. $64.9 million in Fiscal 2014. Restaurant-level margins improved 160 basis points to 16.7% of restaurant sales and operating revenue. Both indicate that management is moving in the right direction.

Although it was a good quarter for Ruby Tuesday, it was just that: one good quarter. It remains to be seen if the management can continue the momentum. The annual income statements for the past four years show that Total Revenue has been steadily falling 3-5% annually. Total Revenue in Fiscal 2015 is down 13.7% from Fiscal 2012. The company has not made a profit in the past four years, but have total net losses over that time of more than $107 million.

Management expressed a rosy outlook today in the earnings call. They estimate Adjusted EPS for Fiscal 2016 to be in the range of $0.12 to $0.17 if the following hold true:

  1. Same-restaurant sales will be flat to up 2%.
  2. A net reduction of 11-14 company-owned restaurants
  3. Improved margins from 16.7% to 17.0-17.5%
  4. Selling, General, and Administrative expenses to be $116-$120 million, vs. $115.3 million in Fiscal 2015

You have to give Ruby Tuesday's management credit for the improvements they've made, but the bottom line is that the company is still losing money. They have profitable quarters from time to time, but they still lose money and increase their debt each year.

The stock price reflects the company's failure to make a profit. Since the bear market ended in 2009, Ruby Tuesday stock topped out at $15.57/share in January 2011. In the last two years it has moved sideways in a range of $5.50 to $8.00, now settling toward the lower end of the range. Ruby Tuesday stock closed today at $6.15/share.

Ruby Tuesday stock chart
Ruby Tuesday Vs S&P 500

Conclusion

Ruby Tuesday is worth watching. The management's recent improvements in the company may make it a good turn-around play at some point. If they can continue moving the company in the right direction, they are close to making it profitable. I still don't want to buy the stock until they show that they can make an annual profit, but recent events show they might be able to do that:

  • Fiscal 2015 was the smallest Net Loss since Fiscal 2012
  • Improved margins -- closing unprofitable restaurants
  • The hiring this week of David Skena as Chief Marketing Officer. He may be exactly what is needed to improve the company's direction

If they start to make a consistent profit, then Ruby Tuesday stock will be worth buying at the current price levels.

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