Restaurant closings failed to pull Luby’s back to profitability during the third quarter ended June 5, with the venerable cafeteria and fast-casual operator posting a net loss of $5.3 million on a 13% drop in revenues, to $74.8 million.
The shortfall compares with a loss of $14.6 million for the year-ago quarter.
Cutting costs is crucial to the multiconcept operator’s turnaround effort, CEO Chris Pappas said in announcing the results. Restaurant-level margins rose to 10.2%, compared with 8.5% a year ago. “However, we recognize that our turnaround depends on growing guest traffic and sales,” he said in the statement.
Same-store sales for the Luby’s cafeteria chain, the company’s core operation, declined 3.1% on a 1.2% slide in traffic.
The 80-unit chain’s average transaction per guest slipped about 2%. Part of the brand’s turnaround strategy is providing options priced under $9 to entice consumers with an everyday value. “This value orientation is helping to improve our guest traffic trends and will be central to growing sales,” Pappas said.
Comparable sales at Luby’s fast-casual business, the Fuddruckers burger chain, fell 6.1% on an 8.7% drop in traffic, and sales for its one remaining Cheeseburger in Paradise casual restaurant declined 4.4%. The same-store declines averaged 4% per restaurant.
The only increase in sales came within Luby’s contract management operations, with revenues rising by $900,000, to $7.6 million for the quarter, on the addition of new accounts.
The numbers show that Luby’s has quietly been shuttering branches of all three of its restaurant brands. Since the third quarter of fiscal 2018, the company has closed 18 Fuddruckers units, six Luby’s cafeterias and six Cheeseburger in Paradise locations. Five company-operated Fuddruckers restaurants were refranchised.
The company has been under pressure from Bandera Partners, an investment concern that controls more than 9% of Luby’s stock, to shake up its board and reconsider its strategy. The investor has not responded publicly to Luby’s earnings report from this morning.
As of June 5, Luby's operated 80 namesake cafeterias, 49 Fuddruckers units and a lone Cheeseburger in Paradise.