Domino’s Pizza, Inc. (DPZ), Brinker International, Inc. (EAT): Are These Restaurant Chains Satisfying Investors’ Appetites?

Casual Tuesdays

For the fiscal third quarter ending March 5, Ruby Tuesday, Inc. (NYSE:RT) reported a 2.8% decline in same-restaurant sales for company-owned stores, and a decline of 1.7% at domestic franchise restaurants. The company has 709 company-owned and 77 franchise stores. Net income from continuing operations also suffered a decline to $4.7 million, compared to $6.9 million the year before.
The modest decline in sales, combined with negative year-over-year variances in selling, G&A, and interest expense, were the culprits behind the slide in profit.

The company’s strategic path included closing the Marlin & Ray’s, Truffles Grill, and Wok Hay restaurant concepts, and repurchasing 1.3 million shares of the company’s common stock. They also undertook cost savings initiatives. CEO JJ Buettgen said in the press release that they want consumers to perceive their brand as “more mainstream, lively and approachable.” He added that the company’s marketing message will be aimed at portraying Ruby Tuesday, Inc. (NYSE:RT)’s as “more fun, casual and affordable”. There’s that word again — Affordable. They deliver that message very clearly on their website, where they introduce their summer menu “A Taste of theIslands” by saying “Escape to the Islands without breaking the bank.”

Choosing From This Menu of Stocks

I would need more evidence that Ruby Tuesday, Inc. (NYSE:RT)’s repositioning strategy is working before I could be confident about the stock. This company would be my third choice.

Brinker International, Inc. (NYSE:EAT)’s Chili’s restaurants already are well entrenched in the “fun, casual and affordable” niche that Ruby Tuesday is striving for. Their initiatives to improve productivity and lower costs should continue to show up in the bottom line.

Domino’s Pizza, Inc. (NYSE:DPZ)’s diversified menu positions them to compete with the host of casual dining establishments customers have to choose from, and not just with other pizzerias. Their aggressive international expansion is also a strategy that is clearly working.

Their international segment has achieved 77 quarters in a row of same-store sales growth. Since 2008, Domino’s percentage growth in  international locations has exceeded that of both Starbuck’s and McDonald’s.

I’m impressed with both Brinker’s and Domino’s chances to deliver positive results for investors.

The article Are These Restaurant Chains Satisfying Investors’ Appetites? originally appeared on Fool.com and is written by Brian Hill.

Brian Hill has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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