Luby’s Inc. has shuttered eight restaurants since May and is looking to close more units to pay off debt, the chain’s CEO announced.
The move follows a “going concern warning” issued by Luby’s management in the company’s quarterly earnings report for the period ended June 6, noting that the chain was in default on some of its $44 million in debt and may have trouble staying in business.
“The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and obtain alternative financing to refund and repay the current debt owed under its Credit Agreement,” the SEC filing notes. “The above conditions raise substantial doubt about the Company’s ability to continue as a going concern.”
Luby’s financial advisors did not respond to a Restaurant Business request for additional comment.
The properties sold for a total of $11.6 million, reducing the company’s total debt balance to $39.5 million as of the fiscal year ended Aug. 29. Luby’s reported total sales of $86 million for the third quarter ended June 6, down 3.1% year over year. Same-store sales decreased 0.9%. At that time, the company announced plans to sell 14 properties, which were expected to generate $25 million in proceeds.
“We are committed to actively pursuing these property sales and are currently in discussions to sell additional properties,” Luby’s President and CEO Chris Pappas said in a statement. “We believe positioning our company to have lower debt, improved same-store sales throughout our restaurant portfolio, and a lower overall cost structure will enhance our returns.”
Luby’s Inc. currently operates 147 restaurants, including 84 Luby’s Cafeterias, 61 Fuddruckers and two Cheeseburger in Paradise units.
Luby’s is not alone in its financial struggles. A number of restaurant companies have filed for bankruptcy protection in recent weeks, including Ruby’s Diner, Mike Isabella Concepts and Noon Mediterranean.