Nothing could be pleasing for a restaurant chain than seeing robust growth on a continuous basis, and Ruby Tuesday (RT, Financial) is one of them. The company entered the new fiscal year strongly with impressive results. The company came up with impressive improvement for the third consecutive quarter. This shows that the stock has much steam and this growth helped it to gain enough market share in the past. The stock rose more than 16.2%. Management is pleased with the momentum that it is seeing and it is also undertaking various initiatives and improvements in the menu and focusing on improving the overall guest experience. With future looking bright let us shift the spotlights on the overall underlying business of Ruby Tuesday.
Strategies are working well
It seems that Ruby Tuesday’s effort to capture market once again are really working on well as the company is seeing good improvement in the same store sales. It is narrowing its loss and the momentum that it is showing indicates that Ruby has a long way to go. Ruby is further focusing on various initiatives to improve its market share and market position. The company’s operational and functional growth can be further seen by the fact that it outperformed the Knapp Track industry benchmark on both the same restaurant and same restaurant guest count in the recently reported quarter.
Moving on, Ruby is also making efforts for the brand transformation which it thinks will benefit it in a long run and will have a positive impact on the sales and guest count trends. As it expects the sales and guest count to improve, it is excited to see growth in the restaurant level returns. It is making various initiatives to improve its profitability. It has plans to add value to its menu by making additions also, it will have a laser focus on improving the overall guest experience which will be helpful for the company to attract more traffic into the restaurants.
Ruby is well aware of the changing food habit preferences of the people. It has also suffered due to this in the past when it posted weaker and expected same store sales. But now Ruby is on fire and it is now making advances in making this brand more casual, energetic and affordable. It is making itself a fun and a casual chain to draw its customers back. Due to the higher operating costs, Ruby is now closing Wok Hay and Marlin & Ray’s restaurants to lower its operating cost which will further improve its profit margins. In addition, it is also adding cheaper items in the menu to improve the customer traffic in its stores.
Ruby Tuesday is already working in line with its strategy to strengthen its brand transformation efforts. It is now laser focused on improving its business model and for the next fiscal year, Ruby will be focusing on some key initiatives as a part of its growth strategy.
Inventory management is also one of the key areas of focus for Ruby Tuesday. This will improve the service as food ordering and production will be timely and accurate which will strengthen its food quality, while reducing its food costs. Further, with this system its managers have to spend less time on activities such as product ordering, this will give them ample to interact with team members and guest.
Conclusion
Now moving on to the fundamentals, the company doesn’t have trailing P/E and forward P/E as it is still making losses. But looking at the strategies and the initiatives it can be expected that Ruby Tuesday will move with a good momentum. For the next five years its earnings are expected to grow by 5%, which is not close to the industry average of 14.63%. All these facts indicate that the stock is growing but the earnings growth is slow and will take time to come into its full force. So as of now the investors should consider other profitable stocks in their portfolio until Ruby Tuesday gains more market share and shows concrete signs of solid earnings growth.
