Shares fell $1.41, or 7 percent, to $18.70 in morning trading. Earlier in the morning, the shares dipped to a new low of $18.52. The shares have traded between $20.03 and $30.80 during the past 52 weeks.

The shares were also hurt by a downgrade on the shares from Morgan Keegan analyst Robert M. Derrington. Derrington cut his rating to "Market Perform" from "Outperform," citing the lower-than-expected profit guidance and the company's same-store sales projection for the quarter.

Ruby Tuesday said it expects its same-store sales to fall 4.8 percent at company stores and 2.9 percent at franchised stores in the quarter ended Sept. 4.

Same-store sales, or sales at stores open at least a year, is a key indicator of retailer and restaurant performance since it measures growth at existing units rather than newly-opened ones.

The lower same-store sales estimate led the company to say its profit would drop to 21 cents per share from 37 cents per share in the prior-year quarter. The forecast includes an expected charge of 5 cents per share for remodeling projects. Analysts polled by Thomson Financial expected a profit of 26 cents per share, excluding one-time items.

"While the company's remodel program could assist trends in the second half of fiscal 2008, pending that pickup we remain cautious in the current weak operating environment," Derrington said in a note to investors.

Ruby Tuesday of Maryville, Tenn., blamed its lower sales and profit on higher gas prices and interest rates, which have depressed consumer spending. Promotional activity among competitors was also to blame, the company said.

"While we knew we were facing a challenging first quarter, as indicated by June's negative same-restaurant sales and our first-quarter guidance, we underestimated the impact of continued high gas prices, higher interest rates, and competitive value promotion," said Ruby Tuesday Chief Executive Sandy Beall in a statement. "These difficulties are felt at all income levels, but especially in middle-income America - our and bar and grill's core customer base."

J.P. Morgan analyst Steven Rees said in a client note that the consumer environment will most likely remain challenging for at least the next six months, particularly as Ruby Tuesday moves from a bar and grill concept to a more upscale format.

The chain is now working to remodel its stores and its menu to cater to a more higher-income clientele.