Luby's 2Q sales 'disappointing'

Officials at Luby’s Inc., the cafeteria and multi-concept burger operator, called second-quarter sales “disappointing,” as the company integrates its recent Cheeseburger in Paradise acquisition into its portfolio.

Year-over-year sales for Cheeseburger in Paradise, which the company purchased for $11 million in a deal closed Dec. 6, fell about 12 percent.

Luby's expected some decline in the brand’s slower fall and winter months, although weather and other circumstances also attributed to the drop, said Luby’s president and chief executive Chris Pappas. “We’re mindful of this development,” Pappas said in a call with investors Thursday. “We attribute a portion of this decline in comp sales for Cheeseburger in Paradise in the quarter to some significant weather events, some prior-year promotions not repeated this year, as well as the overall industry negative trend in traffic in calendar 2013.”

Pappas said Luby’s, which also owns the Luby’s cafeteria chain and owns and franchises the Fuddruckers and Koo Koo Roo brands, saw opportunities in Cheeseburger in Paradise’s menu, with an improved burger, a better customer experience and the acquisition of good real estate leases.

“Our aim is to emphasize quality and product innovation with the brand and not resort to discounting these truly unique menu items,” Pappas said. He added that Cheeseburger in Paradise’s real estate was well located and had new buildings, and the company plans to invest in décor to help build sales in the slower fall and winter months.

K. Scott Gray, Luby’s chief financial officer, said Cheeseburger in Paradise units had generated $7.7 million in sales from the close of the deal on Dec. 6 to the end of Luby’s second quarter on Feb. 13.

“We expect this brand to contribute to profitability in the second half of the year,” Gray said.