Ruby Tuesday to Close Nearly 100 Restaurants by September
Ruby Tuesday, Inc. announced fourth quarter and fiscal year 2016 financial results for the periods ended May 31 and provided a fiscal year 2017 outlook. The company also announced plans to streamline the organization, improve financial profitability, and create long-term value for shareholders through its Fresh Start initiative.
Ruby Tuesday also recently completed a comprehensive review of its corporate-owned restaurant portfolio and determined that it was in the company’s best interest to close approximately 95 underperforming restaurants. These locations will cease operations by September 2016. As of May 31, Ruby Tuesday’s system included 724 restaurants, of which 646 were company-operated. This conclusion, followed a rigorous unit-level analysis of sales, cash flows and other key performance metrics, as well as site location, market positioning, and lease status.
The Fresh Start initiative will be achieved through the execution of several key strategies including an Asset Rationalization Plan along with programs to improve the food and beverage offering, dining environment and service at its namesake brand through a Fresh New Menu, Fresh New Garden Bar, and Fresh Experience. These initiatives will be rolled out in phases across multiple markets throughout the coming quarters.
JJ Buettgen, chairman of the board, president, and chief executive officer, comments, “Our fourth quarter was impacted by softness in the casual dining industry and increased promotional activity by our peers. Given that we expect the macro environment to remain challenging for some time, we are taking the necessary steps to change the trajectory of our business.”
Buettgen continues, “Our Fresh Start Initiative has been designed to streamline our organization through asset rationalization, improve financial profitability, and ultimately create long-term value for shareholders. Our Fresh New Menu, Fresh New Garden Bar, and Fresh Experience initiatives will position us to accelerate traffic and will be supported by better in-restaurant execution, refining our media and targeting plans, and incorporating the insights from our Garden Bar and remodel tests into our go forward strategy. Through our goal of attracting more women and young families as well as increasing visits from our current Ruby Tuesday guests, we believe we can return to positive same-restaurant sales, expand restaurant level margins, and increase operating profit.”
Buettgen concludes, "The decision to close restaurants is a difficult but necessary step as we take aggressive actions to strengthen our organization. Performance at each of these locations, despite the loyalty of valued guests and the efforts of our dedicated employees, was not meeting expectations. Full-time and part-time employees impacted by closures will be offered positions in nearby restaurants where possible.”
Fiscal Fourth Quarter 2016 Highlights (13 weeks ended May 31, 2016, compared to the 13 weeks ended June 2, 2015):
Total revenue declined 5.9 percent to $279.3 million, which included a net reduction of 12 corporate-owned Ruby Tuesday restaurants and 17 corporate-owned Lime Fresh Mexican Grill restaurants during fiscal year 2016.
Same-restaurant sales declined 3.7 percent following a 1.7 percent decline in the fourth quarter of the prior fiscal year.
Closure and Impairment expense was $43.8 million primarily due to the announced restaurant closures, compared to $4 million last year
Net Loss was $27.6 million, or ($0.46) per diluted share, compared to Net Income of $4.3 million, or $0.07 per diluted share in last fiscal year’s fourth quarter.
The company prepaid $5.1 million of mortgage debt, unencumbering 18 corporate-owned restaurants.
The company recognized a $5.9 million gain on sales of Lime Fresh Mexican Grill assets.
As of May 31, 2016, the company had cash on hand of $67.3 million.
Fiscal Year 2016 Highlights (52 weeks ended May 31, 2016, compared to the 52 weeks ended June 2, 2015):
Total revenue declined 3.1 percent to $1.1 billion, which included a net reduction of 12 corporate-owned Ruby Tuesday restaurants and 17 corporate-owned Lime Fresh Mexican Grill restaurants during fiscal year 2016.
Same-restaurant sales declined 1.4 percent following a 0.5 percent decline in the prior fiscal year.
Fiscal Fourth Quarter 2016 Financial Results
Total revenue was $279.3 million, a decrease of 5.9 percent or $17.5 million from the fourth quarter of the prior fiscal year. This was due to a net reduction of 12 corporate-owned Ruby Tuesday restaurants and 17 corporate-owned Lime Fresh Mexican Grill restaurants during fiscal year 2016 and a same-restaurant sales decline of 3.7 percent at corporate-owned Ruby Tuesday restaurants.
The fourth quarter same-restaurant sales decrease was driven in part by traffic declines resulting from a challenging and competitive external environment. Year-over-year guest counts fell 4.6 percent while average check rose 0.9 percent.
Fiscal Year 2016 Financial Results
Total revenue was $1.1 billion, a decrease of 3.1 percent or $35.3 million from last fiscal year, primarily due to a net reduction of 12 corporate-owned Ruby Tuesday restaurants and 17 corporate-owned Lime Fresh Mexican Grill restaurants and a same-restaurant sales decline of 1.4 percent at corporate-owned Ruby Tuesday restaurants. Year-over-year guest counts fell 3.9 percent for fiscal year 2016 while average check rose 2.5 percent.
The company ended fiscal year 2016 with cash and cash equivalents totaling $67.3 million and book debt of $223.7 million. This compares to cash and cash equivalents totaling $52.5 million and book debt of $229.1 million as of March 1, 2016.
As of May 31, 2016, there were 724 Ruby Tuesday restaurants system-wide, of which 646 were corporate-owned. During the fourth quarter, four corporate-owned Ruby Tuesday restaurants were closed and one was opened. Additionally, one domestic franchised Ruby Tuesday restaurant was closed. The company also opened one and closed two international franchised Ruby Tuesday restaurants.