LRI Holdings Inc., the parent company of Logan’s Roadhouse Inc., reported this week a wider net loss of $13 million in its first quarter. The results came amid declining sales and traffic, as the steakhouse chain eliminates discounts it had relied on for years.
The loss in the first quarter ended Nov. 2 was 7.6-percent lower than the $12.1 million loss the Nashville, Tenn.-based company reported in the same period a year ago.
Same-store sales fell 1.3 percent in the quarter and traffic fell 5.7 percent, offset by an increase in average check of 4.7 percent, due to a reduction in buy-one-get-one-free offers and other discounts.
“It takes an effort to get away from years of doing BOGO,” said Sam Borgese, president and chief executive of Logan’s Roadhouse, in an earnings call Tuesday.
As a result of the same-store sales decline, Logan’s net sales fell 1.2 percent, to $145.2 million, compared with $147 million a year ago.
The casual-dining operator’s adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 33.5 percent, to $4.5 million, in the quarter, from $6.7 million in the same period a year ago.
Logan’s sales decline came despite rising employment and lower gas prices, as well as what is seen as a healthy environment for steak chains. Competitors such as Texas Roadhouse, Outback Steakhouse and others have reported strong sales in recent quarters.
Borgese said Logan’s Roadhouse does not appear to be benefitting from lower gas prices. “I don’t believe that the gas price decreases are that obvious to our brand,” he said.
Traffic declines the past three years have hurt Logan’s operating margins and led to net losses in each of the past three years, the company said in filings with the Securities and Exchange Commission this week.
LRI Holdings has $372 million in long-term debt, which requires two interest payments each year. Because of the company’s cash flow position, it often needs to draw down funds from its $30 million revolving credit facility to make those payments.
This week, the company amended that revolving credit line, extending it to April 2017. As part of that amendment, LRI agreed to various restrictions in capital spending, debt levels and the use of any cash generated from asset sales, such as the sale-leaseback of restaurants.
Borgese was named chief executive of Logan’s Roadhouse in early October. Since then he has focused on a “quick drilldown of every area” of the business to determine ways the company can cut costs, he said.
The company is working on procurement, marketing, menu development and menu simplification, he added. Borgese did not provide details, but promised to do so in future earnings calls.
The company decreased advertising spending by about $3 million in the quarter, executives said on the call, most of that in reduced television spending.
“We’re really focused on having execution within our four walls be updated and perfected before expending large advertising dollars inviting people to Logan’s again,” Borgese said.
At the end of the quarter, the Logan’s Roadhouse chain included 235 company-operated restaurants and 26 franchised locations in 23 states.
Contact Jonathan Maze at [email protected].
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