Luby’s announced continuing losses in the fourth quarter, which executives hope to turn around with initiatives focused on reducing costs and improving performance, as well as a special committee formed by the company’s board of directors.
Chief executive officer Chris Pappas said leadership wasn’t pleased with Q4’s results, with same-store sales decreasing 3.7 percent and total sales falling 14.9 percent to 71.4 million due in large part to the company operating 22 fewer stores.
LUBY'S BEGINS STRATEGIC REVIEW
Luby’s sold property generating 35.9 million in proceeds. In addition, over the last two fiscal years, the company closed 39 underperforming restaurants. Ten were Luby's cafeterias and 22 Fuddruckers; seven were Cheeseburger in Paradise restaurants, which leaves only one location in Secaucus, New Jersey.
Here’s how Luby’s Q4 results broke down by brand:
Luby’s: Same-store sales declines of 3.2 percent; guest traffic down 1.1 percent; check down 2.2 percent.
Fuddruckers: Same-store sales fell 5.5 percent; guest traffic decreased 3.8 percent; check fell 1.8 percent.
Luby’s Culinary Contract Services continued to shine as revenues boosted $7.3 million with 31 operating locations at the end of Q4, compared to $6.4 million with 28 venues at the end of fiscal 2018.
Year-over-year, Luby’s full-calendar comps declined 2.9 percent. Fuddruckers was down 7.5 percent. Combo stores slipped 6.8 percent.
Pappas said the company is currently transitioning portions of its accounting, payroll, operational reporting and other back-office functions to a leading multi-unit restaurant outsourcing firm. He said Luby’s hopes this move will lead to additional cost savings.
While the company did reduce certain expenses in Q4 by 1.2 million or about 12.7 percent compared to last year, Pappas said, Luby’s still is working to match up corporate overhead and other costs to the current size of the organization.
“While we still have considerable work to do, we see that both our core brands are trending the right way. We're working hard to serve our guests every day and increase same-store sales and guest traffic and improve our operating leverage created from a lower cost structure, hopefully, to increase our cash flow to the bottom line as well,” Pappas said. “While this is obviously a process, our goal remains clear, turning around our company to enhance profitability and drive shareholder value.”
COO Todd Coutee, who was appointed in 2019 as a part of leadership changes, said Luby’s is already seeing positive guest traffic and positive sales trends in fiscal 2020 compared to the previous year. Strategic initiatives launched in late fiscal year 2019 are gaining traction as Luby’s works to transform to a more positive culture, increase traffic and sales, and eventually improve profitability.
“We continue to see great results as we maintain a consistent pricing structure that allows the value-minded guest an opportunity to dine with us multiple times per week,” Coutee said. “As we continue to grow traffic, our marketing effort focuses on our heavy users who are loyal to the brand.”
CFO Scott Gray said Luby’s reported a loss from continuing operations of $9.1 million, which compared to a loss the year-ago period of about $2 million. That was primarily due to a $5.6 million decline in gain on asset sales and a $3.9 million drop in store-level profit, partially offset by $1.1 million in lower depreciation expense and $1.2 million reduction in company expenses in the quarter.