Ruby Tuesday, Inc. announced fiscal second quarter 2016 financial results for the period ended December 1, and also updated its guidance for fiscal year 2016.
Some highlights include:
- Same-restaurant sales increased 0.8 percent.
- Total revenue decreased 0.6 percent to $261 million, primarily due to a net reduction of 20 corporate-owned restaurants.
- Restaurant level margin improved 175 basis points to 15.6 percent.
- Net loss was $15.8 million, or ($0.26) per diluted share, compared to $9.3 million, or ($0.15) per diluted share.
- Adjusted Net Loss was $2.4 million, or ($0.04) per diluted share, compared to a prior year Adjusted Net Loss of $5.0 million, or ($0.08) per diluted share.
- Adjusted EBITDA was $14.1 million compared to $10.2 million in the prior year.
- As of December 1, the company had cash on hand of $45.3 million.
JJ Buettgen, chairman of the board, president, and chief executive officer, comments, “We are pleased that our positive performance continued for a second straight quarter with an increase in same-restaurant sales of 0.8 percent, which outperformed the Knapp Track industry benchmark by 60 basis points. As our top-line continued to stabilize, we also delivered solid year-over-year improvement in restaurant level margins and Adjusted EBITDA during the quarter. We believe we have the right strategy in place to achieve our guidance for the fiscal year and remain focused on our primary goal to deliver profitable and sustainable same-restaurant guest count growth which we believe will lead to more consistent same-restaurant sales performance.”
Buettgen continues, “Going forward, we will continue to lead our brand transformation, executing on our new key priorities which include enhancing the menu offerings, testing our new Garden Bar initiative and remodel program while communicating more effectively with our target customer through digital and social media. We believe these initiatives will foster higher guest retention and frequency across all Ruby Tuesday locations over the longer term and ultimately produce sustainable same-restaurant sales growth, improve our long-term profitability, and maximize value for our shareholders. I would like to thank our entire team for their commitment to implementing our brand transformation strategy.”
Total revenue was $261 million in the fiscal second quarter, a decrease from last year of $1.7 million, or 0.6 percent, primarily due to a net reduction of 20 corporate-owned restaurants compared to the second quarter last year, partially offset by a same-restaurant sales increase of 0.8 percent at corporate-owned Ruby Tuesday restaurants.
Second quarter same-restaurant sales increase of 0.8 percent was positively impacted by around 30 basis points due to the Labor Day holiday being reported in our first quarter last year versus being reported in our second quarter this year. Year-over-year guest counts were down 2.2 percent for the quarter while check growth rose 3.0 percent.
Cost of sales decreased to $70.3 million from $71.6 million in the prior fiscal year’s second quarter. As a percentage of corporate-owned restaurant sales, cost of sales decreased around 30 basis points to 27.1 percent from 27.4 percent. The decrease was primarily driven by a one-time settlement for pricing discrepancies and expense savings, partially offset by inflationary cost pressures.
Selling, general, and administrative expenses (SG&A) increased to $27.8 million from $27.3 million in the prior fiscal year’s second quarter. The increase in SG&A was primarily due to increased marketing spend to support the transition and launch of our new marketing campaign, partially offset by lower G&A expenses.
GAAP net loss was $15.8 million, or ($0.26) per diluted share, compared to net loss of $9.3 million, or ($0.15) per diluted share in the prior fiscal year’s second quarter.
Adjusted Net Loss was $2.4 million, or ($0.04) per diluted share, an improvement of $2.6 million compared to a Net Loss $5.0 million, or ($0.08) per diluted share, in the prior fiscal year’s second quarter. A reconciliation between net loss and Adjusted Net Loss is included in the accompanying financial data.
The company ended the fiscal 2016 second quarter with cash and cash equivalents totaling $45.3 million and book debt of $231.9 million.
On November 5, Ruby Tuesday announced an agreement to sell eight corporate-owned Lime Fresh Mexican Grill locations to Rubio’s Restaurants for around $6.3 million in a transaction projected to be completed by the end of the fiscal year. Additionally, the company closed its 11 remaining corporate-owned Lime Fresh Mexican Grill restaurants while maintaining its eight franchised locations.
As of December 1, there were 733 Ruby Tuesday restaurants system-wide, of which 655 were corporate-owned, and 16 Lime Fresh Mexican Grills, eight of which were corporate-owned. During the second quarter, there was one Ruby Tuesday and 11 Lime Fresh Mexican Grill closings.
The company is reaffirming its full-year Adjusted Net Income per share guidance of $0.12 to $0.17 based on the following updated assumptions:
- Same-restaurant sales: Fiscal 2016 same-restaurant sales of flat to up 1 percent (vs. flat to up 2 percent previously). Third quarter-to-date same-restaurant sales support this range.
- Unit Development: A net reduction of 11-14 corporate-owned Ruby Tuesday restaurants.
- Restaurant Level Margin: Fiscal 2016 restaurant level margins of 17.3 percent to 17.6 percent (vs. 17 percent to 17.5 percent previously).
- Selling, General, and Administrative Expense: Fiscal 2016 SG&A ranging from $114 to $117 million (vs. $116 to $120 million previously).
- Tax Rate: Adjusted Net Income is calculated using the statutory tax rate of 39.69 percent. This provides a more consistent tax rate to facilitate review and analysis of the Company’s financial performance. ThecCompany is limited in the amount of tax credits that can be utilized each year based upon taxable income for that year and cannot recognize a full benefit of any year’s currently generated tax credits or tax credit carry-forwards due to the Company’s tax valuation allowance.
- Capital Expenditures: Fiscal 2016 capital expenditures ranging from $36 to $38 million (vs. $34 to $38 million previously).