Luby’s Inc., parent to the cafeteria chain, continued its sale of assets and its Fuddruckers refranchising program in the second quarter amid ongoing challenges for the brand, executives said Monday.
“The business of operating mature brands in a highly competitive market is a hard one,” said Chris Pappas, Luby’s president and CEO, in a second-quarter earnings call.
The Houston-based company, which also operates a culinary contract services division, said it was continuing its asset sales program, which it launched last year.
“Since the beginning of second quarter last year, we have closed 27 underperforming restaurants,” Pappas said. “And through our $45 million asset sales program that began last year, we generated proceeds of $34.7 million.”
The company is also continued to sell company-owned Fuddruckers outside the Houston home market, refranchising five units in the San Antonio area in early April, Pappas said.
Blended same-store sales in the second quarter, which ended March 13, were down 3.3%, an improvement from the negative 5.5% in the first quarter, he said. Same-store sales in the most recent quarter were down 2.2% at Luby’s Cafeterias, down 5.3% at Fuddruckers, down 7.1% at hybrid Luby’s-Fuddruckers combo locations and down 3.1% at Cheeseburger in Paradise.
“Despite same-store sales results for the quarter below our expectations for the full year, we did improve sequentially at our Luby’s Cafeteria and Fuddruckers,” Pappas said.
Todd Coutee, Luby’s chief operating officer, said, “We believe this progress will continue as we execute our internal action plans to drive better results.”
Pappas said the company has hired an outside corporate management consulting firm to identify cost savings and improve growth.
Year-to-date 2019 same-store sales are down 4.6%, the company said. Luby’s culinary contract division remains strong, Pappas said, growing to 33 locations, including health care, corporate dining sites and sports stadiums, and increasing sales 28% over the past year, to $7.5 million.
For the second quarter ended March 13, Luby’s swung to a profit of $6.6 million, or 22 cents a share, from a loss of $11.6 million, or 39 cents a share, in the same period last year. The most recent quarter included $12.7 million in gains from the sales of property. Revenues were down 9%, to $74.4 million, from $81.8 million in the same quarter last year.
Corporate costs in the second quarter included $1 million from the January proxy contest over board seats, Pappas said.
Luby’s shareholders elected the company’s slate of nine board nominees despite a proxy contest initiated by Bandera Partners LLC, a New York hedge fund.
As of March 13, Luby’s owned and operated 136 restaurants, including 81 Luby’s Cafeterias, 54 Fuddruckers and one Cheeseburger in Paradise restaurant. The company also franchises 102 Fuddruckers in the United States, including Puerto Rico, as well as Canada, Colombia, Mexico and Panama.
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