Shares of Ruby Tuesday, Inc. (RT) hit a new 52-week high of $8.28 in the first half of the trading session on Nov 25, based on strong fiscal first-quarter 2015 results. The company’s closing price of $8.20 reflects a significant year-to-date return of over 17.5%. The trading volume for the session was nearly 0.5 million shares.
The company’s share price has been rising ever since it reported strong fiscal first-quarter results and raised the fiscal 2015 guidance on Oct 8.
Ruby Tuesday’s fiscal first-quarter 2015 loss of 1 cent a share was significantly narrower than the year-ago loss of 34 cents as well as the Zacks Consensus Estimate of loss of 13 cents. The upside reflects improvement in comps and decline in selling, general and administrative expenses.
Same-restaurant sales (comps) were up 1.1% at company-owned restaurants, better than the 0.4% comps growth in the prior quarter. Also, comps exceeded management’s expectation of its being down 1% to up 1%. This reflects a 1.3% increase in guest count, considerably better than the 0.2% improvement in the last quarter and 1.7% decline in the year-ago quarter.
Also, comps rose 6% at 31 domestic Ruby Tuesday franchise restaurants, an improvement from the 4.9% increase in the previous quarter. Ruby Tuesday’s menu innovation led to the comps improvement.
Restaurant-level margins stood at 17.4%, up 420 basis points (bps) year over year, owing to brand transformation efforts. Selling, general and administrative expenses, as a percentage of revenues, declined 180 bps to 11% owing to lower marketing expenses on efficient media and production plan.
Given the positive results, Ruby Tuesday raised the lower end of the comps guidance. Further, the company increased the restaurant-level operating margin forecast, while lowering selling, general, and administrative (SG&A) expense estimate.
Ruby Tuesday increased the lower end of the comps guidance for fiscal 2015, which now stands at 1–2%, compared with the previous expectation of flat to up 2%. The company expects restaurant-level operating margin to be up 16–17% in fiscal 2015, higher than the previous projection of 15–16% and 15.1% reported in fiscal 2014. Lower cost of goods sold, payroll and related costs, and other restaurant operating costs are expected to make up for the expected increase in incentive compensation.
The company lowered its expectation for SG&A expenses to a range of $127–$130 million for fiscal 2015 from $128–$132 million. The new range is also much lower than the fiscal 2014 expenses of $137.2 million. The decline reflects $5.3 million costs incurred in 2014 due to corporate restructuring and executive transition expenses and savings of $3.5 million from cost reduction initiatives undertaken in 2014, which will benefit the company in 2015.
Also, Ruby Tuesday expects marketing expenses to decline in fiscal 2015 on the back of benefits from its efficient marketing strategies.
Ruby Tuesday currently sports a Zacks Rank #1 (Strong Buy). The following companies with a favorable Zacks Rank that are worth considering include DineEquity, Inc. (DIN), BJ's Restaurants, Inc. (BJRI) and Bloomin' Brands, Inc. (BLMN). While DineEquity and BJ’s Restaurants sport the same Zacks Rank as Ruby Tuesday, Bloomin' Brands has a Zacks Rank #2 (Buy).
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