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Ruby Tuesday, Inc. Reports First Quarter Diluted Earnings Per Share and Provides an Update on the Company's Outlook for Fiscal 2008

10/10/2007

MARYVILLE, Tenn.--(BUSINESS WIRE)--Oct. 10, 2007--Ruby Tuesday, Inc. (NYSE: RT) today reported diluted earnings per share of $0.21 on net income of $11.1 million for the Company's first quarter of fiscal 2008, which ended on September 4, 2007. This compares to diluted earnings per share of $0.37 on net income of $21.6 million for the first quarter of the prior year. The diluted earnings per share impact of costs associated with the Company's remodel initiative in the first quarter of fiscal 2008 was $0.05.

Quarterly Highlights

As previously reported, first quarter fiscal 2008 same-restaurant sales at Company-owned Ruby Tuesday restaurants decreased 4.8%, while same-restaurant sales at domestic franchise Ruby Tuesday restaurants decreased 2.9%, as compared to a decrease of 0.5% and an increase of 1.4% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively, in the first quarter of the prior year.

First quarter fiscal 2008 same-restaurant sales:

                            June      July     August  First Quarter
                          --------- --------- -------- --------------
Company-Owned                 -3.3%     -4.7%    -6.8%          -4.8%
Domestic Franchise            -0.5%     -3.4%    -5.2%          -2.9%
    Other highlights for the 13-week first quarter:

    --  Total revenue increased 2.4% over the same period of the prior
        year.

    --  Average restaurant volumes at Company-owned Ruby Tuesday
        restaurants decreased 3.7% from the same period of the prior
        year.

    --  The Company opened four new Ruby Tuesday restaurants during
        the quarter and purchased eleven restaurants from its West
        Palm Beach, Florida franchisee. Four restaurants were closed
        during the quarter.

    --  Aside from the restaurants sold to the Company, domestic and
        international franchisees opened three new Ruby Tuesday
        restaurants during the quarter and closed one.

    --  Sales at domestic and international franchise Ruby Tuesday
        restaurants (which is the basis for determining royalty fees
        included in franchise income on the Company's income
        statement) totaled $113,371,000 and $117,154,000 for the first
        quarter of fiscal 2008 and 2007, respectively. Fiscal 2008
        sales at franchise restaurants were reduced due to the
        acquisitions of the West Palm Beach franchisee on the first
        day of fiscal 2008, and the prior acquisitions of the Orlando,
        Florida franchisee in the first quarter of fiscal 2007, and
        the South Florida franchisee in the third quarter of fiscal
        2007.

    --  Capital expenditures for new restaurants and routine
        capitalized improvements at existing restaurants were $20.9
        million for the quarter.

    --  Capital expenditures related to the Company's remodel
        initiative were $17.4 million for the quarter.

    --  The Company repurchased 1.7 million shares of its common stock
        during the first quarter at an average price of $23.74 per
        share. As of the end of the first quarter, 7.9 million shares
        remained authorized for repurchase under the Company's ongoing
        share repurchase program.

    --  The Company had 51.7 million shares of common stock
        outstanding at the end of the quarter.

    Fiscal 2008 Guidance

The Company is targeting diluted earnings per share of $0.01 to $0.03 for its second quarter based on same-restaurant sales of down 6.0% to down 8.0% at Company-owned restaurants and includes $0.05 to $0.07 per diluted share for costs associated with the planned remodel initiative. For fiscal 2008, the Company is now targeting diluted earnings per share of $1.01 to $1.13 for fiscal 2008 based on same-restaurant sales of down 3.0% to 5.0% at Company-owned restaurants. The estimate for fiscal 2008 diluted earnings per share includes a reduction for costs associated with our remodel initiative, projected to be $0.18 to $0.20, of which $0.14 to $0.16 is related to the accelerated depreciation of existing assets and approximately $0.04 is related to incremental depreciation on new assets net of the reduction from the related write-offs. Additional assumptions used to determine the targeted range include the following:

    --  20 to 25 Company-owned openings for the year;

    --  20 to 25 franchise openings for the year;

    --  Investments in labor and food cost to achieve a compelling
        value position;

    --  $65-$75 million in capital expenditures for the year for new
        restaurants and routine capitalized improvements at existing
        restaurants; and

    --  $55-$65 million in capital expenditures for the above
        mentioned remodeling of Company restaurants during the fiscal
        year.

Sandy Beall, Founder and CEO, commented, "We are disappointed with our performance. However, we have solid strategies in place that are positioning our brand in a better direction long-term. We have been investing in our plan for over two years now. Our brand scores, food study scores and guest satisfaction scores show solid improvement, and by the spring our reposition should be complete creating a fresher, more relevant, higher quality Ruby Tuesday. Our immediate challenge is to respond to the current sales environment with a much stronger value and promotion strategy that we will start in the second week of October. We will begin with our new lunch advertisement with compelling value featuring Fresh Combinations starting at $6.99, and then introduce further promotions in November through January including quality direct mail advertising to higher income homes highlighting our fresh new food and look in remodeled markets.

"Same restaurant sales for the second quarter are expected to improve through the quarter, from down approximately 10.5% in September, to down 3-4% in November, which includes a check effect that is essentially flat to down. We expect that the lower sales, combined with our food and labor investments will result in much lower second quarter earnings than we originally anticipated. We believe that, with our strategies, traffic, sales, and earnings should improve by year end. We will end the year with the completion of all Company restaurant remodels, and we will be well-positioned for a start to a fresh new year with a stronger brand for the long-term."

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 45 states, the District of Columbia, Puerto Rico, and 12 foreign countries. As of September 4, 2007, the Company owned and operated 691 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 190 and 54 restaurants, respectively.

Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RT).

The Company will host a conference call, which will be a live web-cast, this afternoon at 5:00 p.m. Eastern Time. The call will be available live at the following websites:

    http://www.rubytuesday.com

    http://www.fulldisclosure.com

    Special Note Regarding Forward-Looking Information

This press release contains various "forward-looking statements," which represent the Company's expectations or beliefs concerning future events, including one or more of the following: future financial performance and restaurant growth (both Company-owned and franchised), future capital expenditures, future borrowings and repayment of debt, payment of dividends, stock repurchases, and restaurant and franchise acquisitions and re-franchises. The Company cautions the reader that a number of important factors and uncertainties could, individually or in the aggregate, cause actual results to differ materially from those included in the forward-looking statements, including, without limitation, the following: changes in promotional, couponing and advertising strategies; guests' acceptance of changes in menu items; changes in our guests' disposable income; consumer spending trends and habits; mall-traffic trends; increased competition in the restaurant market; weather conditions in the regions in which Company-owned and franchised restaurants are operated; guests' acceptance of the Company's development prototypes and remodeled restaurants; laws and regulations affecting labor and employee benefit costs, including further potential increases in federally mandated minimum wage; costs and availability of food and beverage inventory; the Company's ability to attract qualified managers, franchisees and team members; changes in the availability and cost of capital; impact of adoption of new accounting standards; impact of food-borne illnesses resulting from an outbreak at either Ruby Tuesday or other restaurant concepts; effects of actual or threatened future terrorist attacks in the United States; significant fluctuations in energy prices; and general economic conditions.

RUBY TUESDAY, INC.

Financial Results For the First Quarter of Fiscal Year 2008
(Amounts in thousands except per share amounts)

                        13 Weeks            13 Weeks
                          Ended               Ended
                        Sept. 4,  Percent   Sept. 5,  Percent  Percent
                                    of                  of
                          2007     Revenue    2006     Revenue Change
                        --------- -------- ---------- ----------------

Revenue:
  Restaurant sales and
   operating revenue     $342,994     98.9  $334,811      98.9
  Franchise revenue         3,803      1.1     3,848       1.1
                        ---------           ---------
    Total revenue         346,797    100.0   338,659     100.0    2.4

Operating Costs and
 Expenses:
 (as a percent of
  Restaurant sales and
  operating revenue)
    Cost of merchandise    92,693     27.0    89,670      26.8
    Payroll and related
     costs                109,941     32.1   103,543      30.9
    Other restaurant
     operating costs       66,887     19.5    61,144      18.3
    Depreciation and
     amortization          23,593      6.9    18,382       5.5
 (as a percent of Total
  revenue)
Loss from Specialty
 Restaurant Group, LLC
 bankruptcy                   164      0.0        88       0.0
Selling, general and
 administrative, net       29,753      8.6    29,427       8.7
Equity in
 losses/(earnings) of
 unconsolidated
 franchises                   846      0.2       (68)      0.0
                        ---------           ---------
Total operating costs
 and expenses             323,877            302,186
                        ---------           ---------

Earnings before
 Interest and Taxes        22,920      6.6    36,473      10.8  (37.2)

  Interest expense, net     7,099      2.0     4,294       1.3
                        ---------           ---------

Pre-tax Profit             15,821      4.6    32,179       9.5  (50.8)

  Provision for income
   taxes                    4,731      1.4    10,629       3.1
                        ---------           ---------

Net Income                $11,090      3.2   $21,550       6.4  (48.5)
                        =========           =========



Earnings Per Share:
Basic                       $0.21              $0.37            (43.2)
                        =========           =========
Diluted                     $0.21              $0.37            (43.2)
                        =========           =========

Shares:
Basic                      52,146             58,141
                        =========           =========
Diluted                    52,429             58,521
                        =========           =========
RUBY TUESDAY, INC.

Financial Results For the First Quarter
of Fiscal Year 2008
(Amounts in thousands)

                                            September 4,    June 5,
CONDENSED BALANCE SHEETS                        2007          2007
------------------------------------------  ------------  ------------
Assets
   Cash and Short-Term Investments                $8,312       $25,892
   Accounts and Notes Receivable                   9,648        14,773
   Inventories                                    20,787        20,032
   Deferred Income Taxes                           4,391         4,839
   Assets Held for Disposal                       28,736        20,368
   Prepaid Rent and Other Expenses                13,786        14,542
                                            ------------  ------------

     Total Current Assets                         85,660       100,446

   Property and Equipment, Net                 1,048,956     1,033,336
   Goodwill, Net                                  18,927        16,935
   Notes Receivable, Net                           8,645         9,212
   Other Assets                                   67,867        69,927
                                            ------------  ------------

     Total Assets                             $1,230,055    $1,229,856
                                            ============  ============

Liabilities
   Current Portion of Long Term Debt,
    including
      Capital Leases                              $2,376        $1,779
   Income Tax Payable                              9,035         5,730
   Other Current Liabilities                     113,519       116,249
   Long-Term Debt, including Capital
    Leases                                       550,645       512,559
   Deferred Income Taxes                          31,034        37,107
   Deferred Escalating Minimum Rents              40,530        39,824
   Other Deferred Liabilities                     80,079        77,282
                                            ------------  ------------

     Total Liabilities                           827,218       790,530

Shareholders' Equity                             402,837       439,326
                                            ------------  ------------

     Total Liabilities and
     Shareholders' Equity                     $1,230,055    $1,229,856
                                            ============  ============

CONTACT: Ruby Tuesday, Inc.
Shannon Hepp, 865-379-5700

SOURCE: Ruby Tuesday, Inc.