QUOTE AND NEWS
Motley Fool  Jul 11  Comment 
The market brushes off Ruby Tuesday’s CFO departure.
DailyFinance  Jul 11  Comment 
Ruby Tuesday, Inc. (NYSE: RT) is scheduled to report its fourth quarter 2014 earnings following the close of financial markets on Tuesday, July 29, 2014 and will webcast its quarterly conference call at 4:15 p.m. Eastern time...
Forbes  Jul 6  Comment 
I replied to Katia that I was prepared to be interviewed. Then I got an email from Katia’s assistant which gave me pause, and, upon reflection, made me decide against the interview. The email had begun by thanking me for agreeing to be...
StreetInsider.com  Jun 26  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Management+Changes/Ruby+Tuesday+%28RT%29+Promotes+Jill+Golder+to+EVP+and+CFO/9616142.html for the full story.
DailyFinance  May 22  Comment 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 05/22/14 -- RT Minerals Corp. ("RTM" / the "Company") (TSX VENTURE: RTM) announces that further to the news release issued on May 14, 2014, the Company has mobilized on the Phase One surface...
DailyFinance  May 15  Comment 
The securities litigation law firm of Brower Piven, A Professional Corporation, announces that a class action lawsuit has been commenced in the United States District Court for the Middle District of Tennessee on behalf of...
TheStreet.com  May 6  Comment 
NEW YORK (TheStreet) -- Microsoft may not be ready to give up on Windows RT just quite yet. The company has invited journalists to an event in New York, later this month, where it's expected to announce a new Surface tablet to compete with...
MedPage Today  May 2  Comment 
(MedPage Today) -- Breast cancer survivors had 50% lower incidence of lymphedema after 5 years if they received radiation therapy to axillary lymph nodes instead of undergoing lymph node dissection, data from a large prospective study showed.
MedPage Today  Apr 25  Comment 
(MedPage Today) -- Grade 1 or 2 endometrial cancer with no invasion or
BusinessWeek  Apr 25  Comment 
Liz Wahl resigned on national television. How did that work out for her?




 

Business Overview

Ruby Tuesday, Inc. (NYSE:RT) was founded in 1972 near the campus of The University of Tennessee. Since that time, Ruby Tuesday has grown to become part of a large public foodservice company in 1982, its own independent, publicly traded company in 1996, and is affiliated with nearly 900 restaurants across the globe.[1] Currently, Ruby Tuesday owns and operates 656 dining restaurants in 27 states and the District of Columbia. Additionally, Ruby Tuesday is engaged in franchise partnerships operating 116 restaurants as well as traditional franchisees operated 49 domestic and 58 international restaurants. Their restaurants stretch across the globe operating in the United States, Asia Pacific Region, India, the Middle East, Puerto Rico, Guam, Canada, Iceland, Eastern Europe, and Central and South America. [2]

Ruby Tuesday positions themselves as high-quality casual dining. Their mission is "Making Guests Happy". As of June 1, 2010 Ruby Tuesday employed approximatley 20,800 full-time and 14,400 part-time employees.[3] During 2010 Ruby Tuesday generated $1.2 billion dollars in revenue and experienced quarterly revenue growth of 3.8%. They reached their 52-week high on January 6, 2011 of $15.57 per share.[4]

Business Segments

Ruby Tuesday offers quality food and service and positions itself to be in the higher end of the bar and grill segment of casual dining. Additionally, they offer franchises for the Ruby Tuesday concept and as of June 1, 2010 they owned and operated 656 casual dining restaurants, located in 27 states and the District of Columbia. As of June 1, 2010, the franchise partnerships operated 116 restaurants and traditional franchisees operated 49 domestic and 58 international restaurants.

They have recently introduced a program called "Franchise Partnership Program" under which they own 1% or 50% of the equity of the Ruby Tuesday franchised restaurants. They do not own any equity of entities that hold franchises under their traditional franchise programs. As of June 1, 2010, Ruby Tuesday had 46 franchisees, comprised of 13 franchise partnerships, 14 traditional domestic and 19 traditional international franchisees. They have signed agreements for the development of new franchised Ruby Tuesday restaurants with 3 franchise partnerships, 11 traditional domestic and 12 traditional international franchisees.

Image:StoresFranchises.png

During fiscal year 2010, there were not any company-owned Ruby Tuesday restaurants opened, 16 company-owned Ruby Tuesday restaurants were closed. Additionally, six franchise restaurants (two domestic and four international) were opened and twelve were closed (ten domestic and two international).[3] Ruby Tuesday has the lowest total of company-owned and franchise restaurants in the last five years. Moreover, their domestic franchise restaurant numbers have decreased over the past several years aside from their international franchise restaurants which have been increasing over the past five years.



Ruby Tuesday has recorded the lowest sales for company-owned restaurants in five years. Additionally, both their domestic and foreign franchise sales have decreased over the past five years.

Competitive Analysis

Casual dining is intensely competitive with respect to prices, services, convenience, locations, and the types and quality of food. Ruby Tuesday competes with other food service operations, including locally-owned restaurants, and other national and regional restaurant chains that offer similar types of services and products. Some of Ruby Tuesday's major competitors include: DineEquity, Inc. (DIN) which owns and operates the International House of Pancakes and Applebee's, Darden Restaurants (DRI) which owns Red Lobster, Olive Garden, Capital Grille, and Red Robin Gourmet Burgers (RRGB).

Supplier Power
Ruby Tuesday negotiates directly with their suppliers for the purchase of raw and processed materials and contracts with select suppliers for both their company-owned and franchised restaurants. If a major supplier or distributor is unable to meet Ruby Tuesday's supply needs, they enter into agreements with alternative providers to supply products to their restaurants. Ruby Tuesday purchases commitment contracts to stabilize the volatile prices of commodities. Ruby Tuesday maintains a minimum amount of inventory in their restaurants due to the short storage life of the products and limited storage space within the individual restaurants. If a disruption arises, all essential food and beverage products can be obtained from secondary vendors and alternative suppliers.[3] Due to Ruby Tuesday's commitment contracts and various supplier alternatives, the supplier power is considered moderate to low.

Degree of Rivalry
Changes in consumer tastes, economic conditions, demographic trends, traffic patterns, and the types and locations of competing restaurants have a dramatic impact on the restaurant business. There is intense competition for management personnel and for attractive commercial real estate sites suitable for restaurants. Factors such as inflation, labor, food equipment, difficulty in attracting qualified management and hourly employees may adversely affect the restaurant industry as a whole and Ruby Tuesday restaurants in particular. [3] The nature of the restaurant industry is highly competitive, many similar restaurants compete for like customer bases. This along with the price sensitivity of labor and materials make the degree of rivalry in the restaurant industry high.

Threat of Substitutes
In times of economic uncertainty, restaurants also compete with supermarkets as guests may choose to limit spending and eat at home.[3] Many people consider going out to eat to be an entertainment expense. Consequently there are a plethora of choices consumers have amongst the entertainment industry. Consumers are able to go to the movies, to a bar, have social gatherings at home, all of these and more can take the place of dining out. Most alternatives offer some form of food and beverage and therefore the threat of substitutes in the restaurant industry is moderate to high.

[5]

Buyer Power
Ruby Tuesday prides itself on marketing to the higher end of the bar and grill segment of casual dining.[3] In times when entertainment spending is being placed under more and more scrutiny by consumers, the restaurant industry is working to bring in every customer possible. The concentration of the restaurant industry is relatively low, there are many restaurants of various sizes and styles that are all competing for similar consumer bases. Although Ruby Tuesday may position itself as higher end bar and grill casual dining, they still compete with many other restaurants that market to the same segments. For these reasons buyer power is relatively high.

Threat of New Entrants
The threat of new entrants in the restaurant industry is high. Ruby Tuesday is constantly in competition with new restaurants and new locations opening up across the globe. The restaurant industry has low barriers to entry and new firms are always coming and going. In the restaurant industry, new entrants can take many forms. Ruby Tuesday competes with small family owned restaurants and larger restaurant chains such as DineEquity restaurants, and Darden Restaurants and its' subsidiaries. For these reasons the threat of new entrants in the restaurant industry is concluded to be high.

Marketing Strategies

Product & Price

Ruby Tuesday restaurants serve simple, fresh, American food with a wide variety of appetizers, handcrafted burgers, a garden bar, which offers up to 46 items, steaks, fresh chicken, crab cakes, lobster, salmon, tilapia, fork-tender ribs, and more. Burger choices include such items as beef, bison, turkey, chicken, and crab. Entree selections typically range in price from $6.99 to $18.99. Ruby Tuesday also offers their RubyTueGo® curbside service and a delivered-meals catering program for businesses, organizations, and group events at both Company-owned and franchised restaurants.[3]

Place

Ruby Tuesday owns and operates 656 dining restaurants in 27 states and the District of Columbia.Their restaurants stretch across the globe operating in the United States, Asia Pacific Region, India, the Middle East, Puerto Rico, Guam, Canada, Iceland, Eastern Europe, and Central and South America. [2]

Promotion

Recently this past October, Ruby Tuesday introduced Sunday Brunch nationwide and have made it a permanent addition to their menu due to its success at providing sales and increasing the perception of their brand as a whole. Additionally this past November they introduced lobster to their menu since it is also associated with the finest restaurants and further builds on their brand image while being offered at a compelling value. In the spring they offer Tuesday Steak & Lobster with prices ranging from $13.99 to $14.99. Also Ruby Tuesday launched Gimme a Mini program which allows guests to get a free Ruby Mini burger with the purchase of a $3 beverage after 9:00 p.m. Ruby Tuesday's marketing strategy for the last year and a half has focused on print promotions, digital media, and local marketing programs to entice guests to see the new Ruby Tuesday, increase frequency of visits, and enhance visibility of the brand.[6]

Financial & Operating Metrics

Image:CommonPB.png

[7][4][8][9][10]

A comparative analysis of several important financial and operating metrics has been assembled in the graph above for Ruby Tuesday and several of its' competitors: DineEquity, Inc. (DIN), Darden Restaurants (DRI), Red Robin Gourmet Burgers (RRGB). In terms of market capitalization Ruby Tuesday is comparable to DRI and RRGB but much smaller than DIN. Although they are not as large as DIN, Ruby Tuesday still commands a large portion of the market. When comparing the firms' P/E Ratio, Ruby Tuesday is among the lower end and behind the industry average. This indicates that the average firm in the restaurant industry is anticipating higher earnings growth. When analyzing return on assets Ruby Tuesday is behind both DIN and DRI, but nearly double RRGB. This shows that Ruby Tuesday is less effective at using its' assets to generate earnings than both DIN and DRI. However, this measure also reveals that Ruby Tuesday is better at converting its' investments into profits than RRGB.

The debt to equity ratio indicates how a particular firm has chosen to finance its operations. DIN shows the highest debt to equity ratio amongst the competitors which indicates that they are aggressive in financing their growth with debt and could result in volatile earnings. Ruby Tuesday has a debt to equity ratio of approximately 62 which is lower than the industry average of 90. In July of 2009, Ruby Tuesday closed an underwritten public offering of 11.5 million shares of Ruby Tuesday, Inc. common stock at $6.75 per share. They received approximately $73.1 million in net proceeds from the sale of the shares which were used to repay indebtedness under a five-year Credit Facility. On April 1, 2010 Ruby Tuesday paid off their remaining balance of $70.1 million of Private Placement Series A Notes using funds borrowed under the Credit Facility.[3] Ruby Tuesday does not use as much debt to finance its operations as the average firm in the restaurant industry does. When looking at the firms' current ratios Ruby Tuesday is comparable to DRI and RRGB. DIN has a current ratio approximately double Ruby Tuesday's. This measure shows that Ruby Tuesday along with DRI and RRGB have a similar ability to pay back their short-term liabilities with their short-term assets. However, DIN is more capable of paying its obligations and more efficient in turning their products into cash.

Image:CCCPB.png


When comparing the competing firms' gross margin, Ruby Tuesday posts the lowest margin. This indicates that Ruby Tuesday is less able to retain profits after incurring direct costs. For every dollar of revenue Ruby Tuesday generates, they retain $0.18 of profit which can then be used to pay off additional expenses. DIN shows the strongest gross margin percentage for fiscal year 2010. An important operating metric in the restaurant industry is inventory turnover. This measure sheds light on a firm's efficiency in terms of selling and replacing their inventories. For fiscal year 2010 Ruby Tuesday had an inventory turnover ratio of approximately 57. The chart on the left shows Ruby Tuesday's sharp decline of inventory turnover rate over the past five years. This shows that Ruby Tuesday has been less effective than prior years at selling and replacing thier inventories.



Cash Conversion Cycle

The cash conversion cycle of a company is an important metric in that it shows how long it takes a company to convert resource inputs to cash inflows. Ruby Tuesday's days of sales of inventory (8) is similar to RRGB (9) but DIN is the lowest at 4. This measure indicates how many days it takes a firm to turn its' inventory. It takes Ruby Tuesday approximately 8 days to turn their inventory as compared to 4 days for DIN. Ruby Tuesday's days sales of inventory for fiscal year 2010 has been higher than all previous five years. Next it is important to examine days sales outstanding. Firms within the restaurant industry traditionally experience a relatively low DSO. Ruby Tuesday has the same DSO as DRI and RRGB (3). This measure indicates that Ruby Tuesday is able to collect sales at the same rate as DRI, RRGB and much faster than DIN. Ruby Tuesday's DSO has remained relatively unchanged over the past several years. Additionally, it is important to look at days payables outstanding to calculate a company's cash conversion cycle.

Ruby Tuesday had a lower DPO than both DIN and DRI for fiscal year 2010. This measure shows that Ruby Tuesday is able to pay off their creditors much faster than DIN and DRI. This means Ruby Tuesday is better able to pay off their creditors on a timely basis. Ruby Tuesday's DPO has remained relatively unchanged over the past three years. Taking each of these measures in the aggregate, they comprise a firm's cash conversion cycle. Ruby Tuesday shows an extremely low cash conversion cycle, similar to DRI, for fiscal year 2010. This indicates that Ruby Tuesday is able to convert resources inputs to cash inflows relatively quickly. However, for the first time in five fiscal years, Ruby Tuesday has posted a positive cash conversion cycle number as can be seen in the chart on the right.

[3][11][12][13][14]

Human Resource

Image:CompPB.png [15]

In the table above executive compensation for fiscal years 2008 through 2010 are displayed. Similar to many other executives across many other industries Ruby Tuesday has decreased their CEO's salary from fiscal year 2009 by $64,000. Moreover, Ruby Tuesday has not increased salaries for any of their executives from fiscal year 2009 to fiscal year 2010. Ruby Tuesday employs approximately 20,800 full-time and 14,400 part-time employees.[3]

Image:WagesPB.png [16][17][18][19]

Displayed in the table above are restaurant positions and their corresponding average wages compared amongst competitors. Ruby Tuesday pays their servers on average several dollars less than Red Robin, Buffalo Wild Wings, and Applebee's. When comparing the position of restaurant manager, all of the competitors are paying approximately $42,000 in annual salary. However, Ruby Tuesday pays the position of general manager approximately $58,750 which is more than all three of the competitors listed.

References

  1. RT Our Story
  2. 2.0 2.1 RT Profile Yahoo Finance
  3. 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 RT 10K 2010
  4. 4.0 4.1 RT Key Statistics
  5. RT Google Image
  6. RT AnnualReport
  7. Yahoo Industry Statistics
  8. DIN Key Statistics
  9. DRI Key Statistics
  10. RRGB Key Statistics
  11. RT 10K 2009
  12. DIN 10K 2010
  13. DRI 10K 2010
  14. RRGB 10K 2010
  15. RT Def14a
  16. AppWages Glassdoor
  17. RT Wages Glassdoor
  18. RRGB Wages Glassdoor
  19. BW3 Wages Glassdoor
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