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    Luby's Closed 21 Restaurants in Challenging Year

  • Along with store closures, Luby’s sold 10 properties during 2018.

    flickr: cybertoad
    Luby's closed the year with positive same-store sales in the fourth quarter, but challenges remain.

    Over the past year, Luby’s has tried to turn around its financial fortunes and improve profitability. In order to get things moving in a more positive direction, the company announced earlier it would sell assets to help pay off debt and close underperforming stores. Overall, Luby’s closed 21 stores in 2018, following nine closures in fiscal 2017.

    Luby’s, which is the parent company of Luby’s Cafeteria, Fuddruckers, and Cheeseburger in Paradise, faced a challenging year overall, said Chris Pappas, president and chief executive officer. “Let me begin by saying that we’re not satisfied with our overall financial results for the year. While operationally, there are several bright spots, the decline in profitability for the whole company is totally unacceptable. We’re taking actions to improve not only financial results but also our operating performance,” he said during a November 12 conference call. The company was founded in San Antonio in 1947 and has been led by the Pappas brothers since 2001.

    Broken down by brand, Luby’s closed four Cafeteria locations in fiscal 2018, 11 Fuddruckers, and six Cheeseburger in Paradise stores. As of August 29, there were 84 Luby’s Cafeterias, 60 Fuddruckers, and two Cheeseburger in Paradise locations on the market. There are also six combo stores.

    “Along with restaurant closures, asset sales program, and pending refinancing, we’ve also made reductions in certain corporate support staffing in the fourth quarter,” Pappas added. “We understand that returning to profitability is the primary goal, and we continue to scrutinize all our costs while focusing on sales growth from all our business segment lines.”

    Across the company, same-store sales decreased 0.5 percent for fiscal 2018, which ended August 28. However, not every brand under Luby’s Inc. ended the year negatively. Pappas reported that Luby’s Cafeteria ended with an increase of 1.5 percent same-store sales for the year after rising 3.9 percent in Q4. This was comprised of a 10.3 percent increase in average spend per quest offset by a 5.8 percent decrease in traffic. This is the second consecutive positive quarter of comps for the chain following a 2.4 percent lift in Q3.

    Fuddruckers’ same-store declined 3.9 percent in Q4 and rose 0.6 percent for the year. The chain’s traffic dropped 8.3 percent in Q4. Cheeseburger in Paradise restaurants witnessed a 10.5 percent comps decline for the fiscal calendar with a 4.4 percent drop in Q4.

    Total sales for fiscal 2018 were $365.2 million, including $332.5 million in restaurant sales, compared to total sales of $376 million, including $350.8 million in restaurant sales, in 2017.

    Loss from continuing operations was $33 million, or $1.10 per diluted share, in fiscal 2018, compared to a loss of $22.8 million, or $0.77 per diluted share, in the previous year.

    “With over 60 percent of our restaurant segment profit being generated by the Cafeteria brand, it remains our biggest opportunity in returning the company to profitability,” Pappas said. “However, in order to improve profitability, we must significantly improve traffic and sales. Each 1 percent improvement in Cafeteria same-store sales assuming a 65 percent flow through is worth about $1 million in store level profit.”

    Along with store closures, Luby’s sold 10 properties during 2018. The sales of these company-owned restaurants generated $14.6 million, or about 25 percent of the value of planned asset sales. “The purpose of the program is to pay down our debt significantly by selling company-owned restaurants whose property values exceeded the unit economics of continued restaurant operations at those locations,” Pappas said.

    While the company is focusing on the success the cafeteria brand, it’s aware improvements need to be made across the board. Chief operating officer Todd Coutee, who was promoted to the role in October, said the company is evaluating what works and what doesn’t across the different brands, working to improve areas of weakness.

    “We’re going to overcome challenges, both internal and external by leading, teaching and influencing our talented team members, which could in turn produce great results,” Coutee said. “That's my commitment and our team’s focus. We have iconic brands that are relevant in today's restaurant landscape and we have room to enhance their appeal to guests through providing remarkable experiences. Our teams in the field will represent each brand through their actions and interactions with our guests, and our fantastic menu offerings will be those that they crave. I believe that these are the keys to generate brand loyalty and repeat business.”

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