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Ruby Tuesday (RT) Drops After Lowering 2012 Earnings Forecast

 April 04, 2012 06:30 PM

Ruby Tuesday Inc. (NYSE:RT), which develops, operates and franchises casual dining restaurants, reported a decline in third quarter earnings due to higher operating expenses and a 5.0% decrease in same restaurant sales. Further, the company lowered its fiscal 2012 earnings forecast, sending its shares down 10.36% in aftermarket trade.

Earnings for the third quarter were $4.54 million or $0.07 per share, down from $16.0 million or $0.25 per share last year. Adjusted earnings were $11.6 million or $0.18 per share, down from last year's $15.7 million or $0.24 per share.

Revenue increased 1.8% to $324.83 million. Analysts had expected a profit of $0.16 per share on revenue of $339.03 million.

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Sales at domestic and international franchise Ruby Tuesday restaurants fell to $43.1 million from $70.7 million, primarily driven by the franchise partnership acquisitions and same-restaurant sales for domestic franchise restaurants decreasing by 5.8% during the third quarter.

Restaurant sales and operating revenue increased to $323.46 million from $317.16 million, while franchise revenue fell to $1.36 million from $1.91 million.

Total operating expenses for the quarter rose to $319.75 million from $300.40 million, due to higher closures and impairments costs.

Looking ahead into the fiscal 2012, the company lowered its adjusted earnings guidance to range of $0.43 to $0.48 per share from previous forecast of $0.55 to $0.65 per share, while Street predicts $0.56 per share. The company also reduced its same-restaurant sales guidance for company-owned restaurants to range of down 4.0% to 4.5% from previous forecast range of down 2.0% to 4.0%.

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Margins are still anticipated to decline slightly with the negative impact of lower same-restaurant sales partly offset by fixed cost leverage from the 53rd week and cost savings initiatives.

The company narrowed its 2012 capital expenditures outlook to range of $35 million to $37 million from previous forecast of $33 million to $37 million. It cut free cash flow estimate to range of $75 million to $85 million from previous range of $90 million to $100 million.

RT closed Wednesday's regular session down 1.99% at $8.88. The stock has been trading between $6.35 and $13.65 for the past 52 weeks.

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