Moderating food costs, especially for beef, and improved same-store sales helped Luby’s Inc. narrow its loss in the second quarter ended March 9, the company said last week.
Executives at the Houston-based parent to the Luby’s cafeteria chain and the Fuddrucker’s and Cheeseburger in Paradise brands said they expect comparatively lower food costs for the rest of the year.
“Our food cost as a percentage of restaurant sales was held by moderating food commodity cost, down 130 basis points year over year, and 60 basis points when compared to the 12-week comparable period,” said Scott Gray, Luby’s chief financial officer, in a call Thursday with analysts.
“We expect the comparison of certain food commodity costs, particularly beef, in the second half of the year to continue to be favorable to last year based on current pricing levels,” Gray said.
Same-store sales in the second quarter increased 2.2 percent systemwide, with a 3.1-percent increase at the cafeterias, a 4.2-percent rise at Cheeseburger in Paradise and a flat comparison at Fuddruckers.
Chris Pappas, Luby’s president and CEO, said Fuddruckers’ guest traffic was down in the quarter.
“But that decline was offset by an increase in average spend per guest,” Pappas said. “Some of that increase comes from modest price increases and some comes from new product mix and guest selecting add-on options."
Luby’s for the second quarter reported a net loss of $599,000, or 2 cents a share, narrowed from a loss of $1.4 million, or 5 cents a share, in the same period a year ago. Restaurant sales in the quarter increased 2.1 percent, to $86.3 million.
While same-store sales were flat at the 77 company-owned Fuddruckers, revenue from the 112 franchised Fuddruckers locations increased, executives said.
“From our franchise pipeline perspective, we have already opened 10 Fuddruckers franchise locations thus far in fiscal 2016,” Gray said. “Two of these openings took place in March after the end of the second quarter. We estimate at least three additional Fuddruckers openings through the rest of fiscal 2016 bringing our total number of new openings to at least 13 total Fuddruckers franchise openings for the full year.”
Gray also said the company is in “advanced discussions” to expand its culinary contract division to a large hospital operator.
Luby’s Inc. operates 178 restaurants nationally: 92 Luby’s cafeterias, 77 Fuddruckers, eight Cheeseburger in Paradise restaurants and one Bob Luby’s Seafood Grill. The company franchises 112 Fuddruckers locations across the United States and Puerto Rico, as well as Canada, Mexico, Italy, the Dominican Republic, Panama, Chile and Colombia. A licensee operates 35 restaurants under the Fuddruckers name. Luby’s Culinary Contract Services provides foodservice management to 28 healthcare, higher education and corporate dining sites.
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