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Ruby Tuesday, Inc. Message Board

  • smaycs4 smaycs4 Oct 30, 2013 5:55 PM Flag

    Ruby Tuesday Needs To Improve Sales Soon

    Ruby Tuesday Needs To Improve Sales Soon- Jonathan Maze
    As we reported Monday, Ruby Tuesday's chairman, Matthew Drapkin, sold most of his stock in the company and resigned his chairmanship. While we don't know the exact reasons for the move, the resignation does highlight the company's current predicament: its free falling sales are threatening the company's cash position.

    In a note yesterday, Raymond James analyst Bryan Elliott said that if the company's sales fall further than many expect this year, it could end up in a negative free cash flow position. And, if that sales weakness is sustained for any period of time, the result could force the company to sell its real estate to pay for maintenance costs.

    Here's how Elliott explained it: Ruby Tuesday is currently planning $32 million in capital expenditures, including $8.5 million for new restaurants, and $6 million on cost reductions. The rest, about $17.5 million, would be on maintenance.

    Elliot is currently forecasting same-store sales in the current fiscal year to be down 5.4 percent. If the company's comps fall 2 percent more than that, by his estimates, the company's cash flow from operations would be less than $20 million, only enough to cover maintenance. A worse sales drop would mean that the company wouldn't generate enough cash to pay for maintenance.

    In the short run, Ruby Tuesday could tap into its excess cash, which was $39.9 million as of August. But a longer-term decline could force more significant changes—notably a sale of the company's real estate. Ruby Tuesday owns 319 units, valued at an estimated $315 million after debt is subtracted.

    Elliott's note shows simply what kind of position Ruby Tuesday finds itself in today. The company's same-store sales fell 11.4 percent in the most recent quarter—the first quarter of its 2014 fiscal year—and its loss from continuing operations was $21.9 million. The company has had only one year of same-store sales growth (0.9 percent, in its 2011 f

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    • I dont think RT is going under or anything but continued weak sales might require more assets sales, or worse, a below market offering.

      In any event, they lose much needed flexability. That said, the stocks holding up better than I expected.

      No 13d filed yet. I presume Drapkin will have to file and it MIGHT, but doesnt have to, contain commentary.

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