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Ruby Tuesday shares up on strong analyst take

The Associated Press

Shares of Ruby Tuesday rose Wednesday, ahead of the restaurant chain's investor meeting, following an upbeat assessment by B. Riley & Co.

THE SPARK: Analyst Conrad Lyon initiated coverage of Ruby Tuesday with a "Buy" rating and a $10 price target, saying that he expects the company's sales erosion may have slowed and that it is well-positioned to recover in tandem with the economy.

Ruby Tuesday holds its investor meeting Thursday and reports third-quarter results later this month.

THE BIG PICTURE: Ruby Tuesday Inc. has been struggling with slower sales and declining profitability as consumers have become more selective about where they spend their money. The company has closed some its lesser brands and is trying to reposition its namesake chain into a more vibrant brand. It is updating its menu, service, atmosphere and advertising in the hopes of drawing more customers.

THE ANALYSIS: Lyon said that he expects Ruby Tuesday will recover as the economy improves and the new menu and marketing efforts take hold. He does have some concerns about the relevancy of the brand after so many facelifts, making it more difficult for consumers to pinpoint the company's niche. That confusion has led to sales volatility as consumers tend to flock to the familiar during uncertain times, said Lyon. But he expects a relatively new management team will deliver a consistent guest experience.

SHARE ACTION: Shares jumped 29 cents, a 4 percent gain, to $7.53 by midday. Shares peaked for the year in July, nearing $10 but fell sharply after it reported a wider fourth-quarter loss.