Ruby Tuesday has taken its share of bruises in the highly competitive and challenging arena of casual dining. On Monday afternoon, the 605-unit chain released its fourth quarter and fiscal 2017 results, as well as something that’s been missing from recent announcements: A path back to profitability its calling the “Plan to Win.”
Ruby Tuesday also revealed it is entering the final phase of “an exploration of strategic alternatives.” This can, it noted, include, but not be limited to, a potential sale or merger of Ruby Tuesday. In response, the chain postponed its annual meeting of shareholders more than a month from December 6 to January 22, 2018.
Will this come with news of a Ruby Tuesday sale?
For now that question remains unknown as the chain forges ahead. Jim Hyatt, president and CEO, expressed optimism with Ruby Tuesday’s fourth-quarter results, which showed some improvement in key areas. Hyatt, who served as the CEO of Church’s Chicken from 2011–2016 and was previously the president and CEO of Cosí, took over the role at Ruby Tuesday in April.
“While the casual dining environment remains challenging and highly competitive, we are pleased to have achieved a sequential improvement in same-restaurant sales and operating performance for the fourth quarter as we had expected. Our same-restaurant sales trend improved 240 basis points from a 4 percent decline in the third quarter to a 1.6 percent decline in the fourth quarter while we held our performance gap relative to the industry constant,” he said in a statement. “Additionally, we reported adjusted net income for the fourth quarter following three quarters of adjusted net losses, as we have stemmed the decline in our top-line while controlling expenses. Looking ahead to fiscal 2018, we expect to achieve year-over-year improvement in restaurant level margins and EBITDA as we execute our new ‘Plan to Win’ strategy.”
In the quarter, total revenue declined 8.8 percent to $254.9 million, a reflection of the net reduction of 103 company-owned stores compared to the fourth quarter of the prior fiscal year. Ninety-five of those restaurants closed in connection with the company’s August 11, 2016 announcement.
For the year, total revenue was down 12.8 percent to $952 million. Same-store sales dropped 1.6 percent in the quarter compared to 3.7 percent in Q4 2016. They declined 3.1 percent for the year compared to 1.4 percent.
Ruby Tuesday’s net loss in the quarter was $8.7 million or 14 cents per diluted share, compared to $27.6 million, or 46 cents per diluted share the previous year. Those numbers were $106.1 million ($1.76 per diluted share) versus $50.7 million (83 cents) for the fiscal year-over-year.
The "Plan to Win" strategy unveiled during the release includes a “road-map for the company over the next 12 months.”
The plan, which features a simplified menu and rollout of a mobile app, looks like this:
Improve Total Guest Experience
- Develop and rollout nine to 12 months operations calendar to enhance operational excellence and support the marketing calendar
- Deploy Operations and Restaurant Support Center platforms to drive performance
- Focus on progressive improvement on all guest experience attributes
Ignite Same Restaurant Sales Growth
- Develop 12 to 15 month marketing calendar to increase frequency of existing and new target guests
- Drive improved ROI for marketing and media spending
- Implement menu simplification and test and pilot new lunch menu
- Re-energize To-Go and Catering Programs
Deliver System Profitability
- Reconfigure and optimize G&A expenses
- Deploy P&L benchmarking tool to drive accountability and enhance unit profitability
- Optimize supply chain process for profitability
“Based on learnings from the field and feedback from team members and guests, we have developed our ‘Plan to Win’ road-map for the next 12 months,” Hyatt said in a statement. “Our top three priorities are to improve the total guest experience, ignite same-restaurant sales growth, and deliver system profitability. We have developed a comprehensive strategy to realize these goals over the stated time frame and believe this game plan will position Ruby Tuesday toward achieving sustained profitable growth and increasing shareholder value.”
Hyatt said Ruby Tuesday started testing the new lunch menu July 10 at 29 restaurants. The menu has a one-page design that includes new items with more desirable price points and helps the brand quicken its lunch service.
The chain is also stepping up its off-premises program. Hyatt said Ruby Tuesday converted some company vehicles to branded catering vehicles, and they're now delivering orders in three markets.
"The increased visibility can drive awareness and ultimately order frequency in these markets, but we're just getting started. We are serious about the sales opportunity and our advantages within it," he said in a conference call.
Delivery in the works as well. Ruby Tuesday is conducting a pilot with Amazon in eight restaurants to "test the mechanics and execution of using third-party delivery," Hyatt said.
Ruby Tuesday also released its asset rationalization plan. The company is in the contract process to sell 21 restaurants with expected net proceeds of $28.2 million or about $1.3 million per location. In fiscal 2017, the company completed sales for 13 properties and netted proceeds of $20.1 million. Ruby Tuesday also settled 32 of the 61 leased properties closed as a result of the plan for about $8.4 million.
During the fourth quarter, Ruby Tuesday closed one company-owned restaurant, bringing the total to 543 of the total system.