• by Aaron Baar , March 10, 2009

Switching to a more tactical, promotions-based approach--particularly as the economy slid further and consumers became more budget-conscious--may have helped restaurant chain Ruby Tuesday spark a turnaround.

 

"On the back of more aggressive promotions and more entrepreneurial store-level efforts, we believe Ruby's traffic trends have improved recently versus previous very weak trends," wrote Morgan Keegan & Co. analyst Robert Derrington in a note to investors Tuesday. "By shifting advertising dollars from TV to more store-level promotions and selective couponing, we believe Ruby's worst traffic declines may be behind."

For fiscal year 2008 (ending last June), same-store sales for the company-owned restaurants were down 9.8% and 7.6% for franchise-owned stores. Since that time, the company completed a makeover for all its restaurants and launched new menu items and a Dinner for Two special. For the second quarter of fiscal 2009, same-store sales at company-owned restaurants were down 10.8%, and down 6.2% at franchised stores.

"Our advertising dollars are focused on promoting value aggressively to generate traffic," said company founder and CEO Sandy Beall in a release announcing the quarterly results. "We are also testing targeted marketing programs in the South, an area that has been especially soft for us."

Recently, the company has embarked on two-for-one sales promotions and couponing through the Internet and newspaper inserts to increase sales. "Consumers are looking for offers like this," spokesman Rick Johnson told USA Today in late February. (The company declined to comment directly to Marketing Daily due to its participation in an investor presentation today.)

Such promotions have led to improved same-store sales, and Derrington anticipates a third-quarter decline only in the "mid single digits" (as opposed to down 17.2% for the same period last year). Yet, he cautioned it was too early for the company to declare victory in its turnaround, he wrote.

"It's still very early in the (turnaround) game for Ruby Tuesday," according to the note. "The economy remains dire, and the restaurant industry remains very competitive."