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Ruby Tuesday, Inc. Reports First Quarter Fiscal 2007 Diluted Earnings Per Share of $0.37 on Positive Sales Momentum

10/11/2006

MARYVILLE, Tenn.--(BUSINESS WIRE)--Oct. 11, 2006--Ruby Tuesday, Inc. (NYSE: RI) today reported diluted earnings per share of $0.37 on net income of $21.6 million for the Company's first quarter of fiscal 2007, which ended on September 5, 2006. This represents an 8.8% increase as compared to diluted earnings per share of $0.34 on net income of $21.6 million for the first quarter of the prior year. During Fiscal 2007's first quarter, the Company adopted Statement of Financial Accounting Standards No. 123R "Share-Based Payment" ("SFAS 123R") on a modified prospective basis, which reduced diluted earnings per share by $0.02 in the quarter. Excluding the effect of adopting SFAS 123R, diluted earnings per share were $0.39 and increased 14.7% over the prior year.

Same-restaurant sales for the first quarter decreased 0.5% and increased 1.4% at Company-owned and domestic franchise Ruby Tuesday restaurants, respectively. For the Company's five-week September period ended October 10, 2006, period-to-date same-restaurant sales were down approximately 0.5% and up approximately 4.4% at Company-owned and domestic franchise restaurants, respectively.

First quarter fiscal 2007 period and the five weeks ended October 10, same-restaurant sales:

                  June -     July-      August -            September-
                  Five weeks Four weeks Four weeks          Five weeks
                  ended      ended      ended       First   ended
                  July 11    August 8   September 5 Quarter October 10
                  ---------- ---------- ----------- ------- ----------
Company-owned:
  Same-restaurant
   sales               -2.6%      -1.5%        3.2%   -0.5%      -0.5%
Domestic
 Franchise:
  Same-restaurant
   sales               -1.3%       1.3%        5.2%    1.4%       4.4%

Due to the 53rd week in the Company's prior fiscal year, the first calendar week of September falls in the August fiscal period this year and was in the September period last year. So the sales benefit from overlapping hurricane Katrina also falls in the August fiscal period in the current year and is the primary cause of the difference between calendar and fiscal periods. To clarify this, and also to allow for easier comparison to our peers, we are presenting our same-restaurant sales on a calendar month in addition to our fiscal same-restaurant sales:

Calendar 2007 monthly same-restaurant sales:

                        June 1-    July 1-    August 1-   September 1-
                        June 30    July 31    August 31   September 30
                        ---------  ---------  ----------  ------------
Company-owned:
  Same-restaurant sales     -3.0%      -1.8%        1.7%          2.9%
Domestic Franchise:
  Same-restaurant sales     -1.6%       0.2%        4.0%          6.5%
    Other highlights for the 13-week first quarter include:

    --  Total revenue increased 9.9% over the same period of the prior
        year.

    --  The Company opened seventeen new Ruby Tuesday restaurants
        during the quarter and acquired seventeen restaurants from its
        Orlando, Florida franchisee. Two restaurants were closed
        during the quarter, while three were sold or leased to an
        existing franchisee.

    --  Franchisees opened ten new Ruby Tuesday restaurants during the
        quarter, while one was closed.

    --  Sales at franchise Ruby Tuesday restaurants (which is the
        basis for determining royalty fees included in franchise
        income on the Company's income statement) totaled $100,067,000
        and $95,903,000 for the first quarter of fiscal 2007 and 2006,
        respectively. Fiscal 2007 sales at franchise restaurants were
        reduced due to the acquisition of the Orlando, Florida
        franchisee.

    --  Capital expenditures were $40.6 million for the quarter.

    --  The Company had 58.2 million shares of common stock
        outstanding at the end of the quarter.

Sandy Beall, Chairman and CEO commented, "With the tough consumer environment, we are pleased with our positive sales momentum throughout the quarter and into September. We believe our calendar monthly same-restaurant sales highlight the benefits from our fiscal 2006 and 2007 initiatives including uncompromising freshness and quality and gracious hospitality. Our July menu, including our new Triple Prime burger and our premium Jumbo Lump Crab Cake, has been well received. Our focus on freshness and quality programs continues with the rollout of our October 16th menu during the second quarter. Our gracious hospitality initiatives - including beverage managers, training managers, and off premise - continue to roll with emphasis on quality, passion, and pride in all that we do. The team member investments we make not only improve service, but continue to result in an all-time low management turnover of below 20%, including management trainees. Our subtle changes in the brand, including new upgraded serving plates, silverware, and uniforms will help us continue to position ourselves as a high quality casual dining concept focused on simple, fresh American dining. We are very excited about the plans we have going forward."

Fiscal 2007 Guidance

The Company is targeting diluted earnings per share of $0.27 to $0.29 for second quarter fiscal 2007 based on same-restaurant sales of flat to up two percent at Company-owned restaurants, continued investments in food and labor, and approximately $0.02 to $0.03 per diluted share impact from stock-based compensation expense. The Company targets diluted earnings per share of $1.70 to $1.75 for fiscal 2007 based on the following:

    --  1.0-2.0% same-restaurant sales growth at Company-owned
        restaurants;

    --  45 to 50 Company-owned openings for the year;

    --  30 to 35 franchise openings for the year;

    --  $145-$155 million in capital expenditures for the year;

    --  Continued future investments in the areas of food and labor;

    --  Stock-based compensation expense of $0.10 to $0.11 per diluted
        share.

Ruby Tuesday, Inc. has Company-owned and/or franchise Ruby Tuesday brand restaurants in 42 states, the District of Columbia, Puerto Rico, and 13 foreign countries. As of September 5, 2006, the Company owned and operated 658 Ruby Tuesday restaurants, while domestic and international franchisees (including Hawaii) operated 196 and 50 restaurants, respectively. Ruby Tuesday, Inc. is traded on the New York Stock Exchange (Symbol: RI).

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 repurchase, and restaurant and franchise acquisitions. 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; laws and regulations affecting labor and employee benefit costs; 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; 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 2007
(Amounts in thousands except per share amounts)

                       13 Weeks             13 Weeks
                        Ended                Ended
                     September 5, Percent  August 30, Percent  Percent
                                    of                  of
                        2006       Revenue   2005      Revenue Change
                     ------------ -------- ---------- -------- -------

Revenue:
Restaurant sales and
 operating revenue      $334,811     98.9   $304,343     98.7
Franchise revenue          3,848      1.1      3,880      1.3
                     ------------          ----------
Total revenue            338,659    100.0    308,223    100.0     9.9

Operating Costs and
 Expenses:
(as a percent of
 Restaurant sales
 and operating
 revenue)
Cost of merchandise       89,670     26.8     81,643     26.8
Payroll and related
 costs                   103,543     30.9     95,729     31.5
Other restaurant
 operating costs          61,232     18.3     53,225     17.5
Depreciation and
 amortization             18,382      5.5     17,174      5.6
(as a percent of
 Total revenue)
Selling, general and
 administrative, net      29,427      8.7     25,959      8.4
Equity in (earnings)
 of unconsolidated
 franchises                  (68)     0.0        (64)     0.0
                     ------------          ----------
Total operating
 costs and expenses      302,186             273,666
                     ------------          ----------

Earnings before
 Interest and Taxes       36,473     10.8     34,557     11.2     5.5

Interest expense,
 net                       4,294      1.3      1,913      0.6
                     ------------          ----------

Pre-tax Profit            32,179      9.5     32,644     10.6

Provision for income
 taxes                    10,629      3.1     11,001      3.6
                     ------------          ----------

Net Income               $21,550      6.4    $21,643      7.0    (0.4)
                     ============          ==========



Earnings Per Share:
Basic                      $0.37               $0.34              8.8
                     ============          ==========
Diluted                    $0.37               $0.34              8.8
                     ============          ==========

Shares:
Basic                     58,141              63,529
                     ============          ==========
Diluted                   58,521              64,290
                     ============          ==========
RUBY TUESDAY, INC.

Financial Results For the First Quarter
of Fiscal Year 2007
(Amounts in thousands)

                                              September 5,   June 6,
CONDENSED BALANCE SHEETS                         2006         2006
--------------------------------------------- ------------ -----------
Assets
   Cash and Short-Term Investments                $16,486     $22,365
   Accounts and Notes Receivable                   11,563      12,020
   Inventories                                     18,639      17,428
   Income Tax Receivable                                -         374
   Deferred Income Taxes                              972       2,343
   Assets Held for Disposal                         8,138      12,833
   Prepaid Rent and Other Expenses                 14,666      10,977
                                              ------------ -----------

     Total Current Assets                          70,464      78,340

   Property and Equipment, Net                  1,020,372     984,127
   Goodwill, Net                                   17,011      17,017
   Notes Receivable, Net                           19,292      21,009
   Other Assets                                    71,006      71,075
                                              ------------ -----------

     Total Assets                              $1,198,145  $1,171,568
                                              ============ ===========

Liabilities
   Current Portion of Long Term Debt,
    including Capital Leases                       $2,171      $1,461
   Other Current Liabilities                      107,360     106,537
   Income Tax Payable                               8,218           -
   Long-Term Debt, including Capital Leases       383,536     375,639
   Deferred Income Taxes                           47,270      49,727
   Deferred Escalating Minimum Rents               38,242      37,535
   Other Deferred Liabilities                      74,407      73,511
                                              ------------ -----------

     Total Liabilities                            661,204     644,410

Shareholders' Equity                              536,941     527,158
                                              ------------ -----------

     Total Liabilities and
     Shareholders' Equity                      $1,198,145  $1,171,568
                                              ============ ===========

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

SOURCE: Ruby Tuesday, Inc.