NEW YORK (AP) -- Shares of Ruby Tuesday tumbled to an annual low Thursday after the restaurant chain posted disappointing first-quarter results and dimmed its outlook for the rest of the year.
THE SPARK: The Maryville, Tenn., company announced its results after the market closed on Wednesday. Ruby Tuesday took a bigger loss than analysts expected and said revenue fell 11 percent to $289.7 million, lower than Wall Street anticipated.
The company said sales at locations open at least a year will fall by a percentage in the high single digits in the second quarter. It said those sales should begin to improve after that, and Ruby Tuesday said that by the fourth quarter, those sales will be better than the year-ago quarter. The company had expected growth in the third and fourth quarters.
Sales at stores open at least a year are considered an important measurement of retailer health because they exclude results from stores that have opened or closed within the last year. Ruby Tuesday said those sales fell 11.4 percent at company-owned restaurants and 8.4 percent at franchised restaurants during the first quarter.
THE BIG PICTURE: Ruby Tuesday Inc. operates 778 stores in the U.S. and other countries under the names Ruby Tuesday and Lime Fresh. The company has been struggling with slower sales and declining profitability as consumers have become more selective about where they spend their money. It has closed some brands and is trying to reposition the Ruby Tuesday chain into a more vibrant brand.
The company said Wednesday that that effort going well, but the shaky economy is still hurting its results.
THE ANALYSIS: Stifel Nicolaus analyst Paul Westra maintained a "Hold" rating on Ruby Tuesday shares.
"The persistent casual-dining sales slowdown has presented a more-than-challenging environment for an in-turnaround concept such as Ruby Tuesday that seeks to re-introduce consumers to its brand," he said. "We continue to believe that mass-casual family dining names such as Ruby Tuesday will continue to underperform until the casual-dining sales softness that has persisted throughout September shows signs of reversal."
SHARE ACTION: Ruby Tuesday stock fell $1.23, or 16.3 percent, to $6.32 in afternoon trading. Earlier the shares reached an annual low of $6.10.
The stock missed out as the broader markets rallied on hopes that the U.S. government is approaching a deal to avoid a default on its debt. The S&P 500 rose 1.65 percent to 1,683.78.