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Cost increases hurt Luby’s Cafeteria

The company says it needs to “critically evaluate” all of its locations amid a widening loss.

The Houston-based owner of Luby’s Cafeteria and Fuddruckers is taking a deep look at its locations, the company said on Monday, as higher costs in the third quarter wiped out improving sales.

Luby’s reported a loss of $14.1 million in the quarter ended June 6, considerably wider than the $400,000 loss a year ago.

Same-store sales decreased 0.9% in the quarter, the company said, including a 2.4% increase at its flagship Luby’s Cafeterias brand, which operates 88 locations. But same-store sales fell 5.8% at its 71-unit Fuddruckers Restaurants concepts and 11.7% at its 8-unit Cheeseburger in Paradise concept.

Store-level profits, meanwhile, were $6.6 million, or 8.5% of restaurant sales, down from $11.6 million or 14% from a year ago. The company said that higher food and labor costs hurt its profitability.

“Our overall cost increases have exceeded our ability to grow restaurant sales quickly enough,” Chris Pappas, Luby’s CEO, said in a statement.

While he said the company’s brands “remain well positioned for the long-term,” Pappas said that the company needs “to critically evaluate again all of our locations to determine which are best positioned for future investment and growth.”

The company has already announced plans to sell 14 of its properties for $25 million. The company is planning an additional $20 million in real estate sales to reduce its debt.

The company has also engaged the investment bank Cowen to help with a refinancing.

Restaurant sales declined nearly 6% in the quarter, to $77.8 million from $82.6 million. But culinary contract services increased nearly 50% to $6.6 million from $4.5 million. Still, restaurant sales make up 90% of the company’s revenue.

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