Luby’s Inc. reported lower same-store sales at its cafeteria and burger brands in the in the third quarter ended June 1, with company executives citing consumer cutbacks and wet Texas weather for the slide.
Third-quarter same-store sales decreased 0.6 percent in the period, the company said, but traffic showed improvements at the Luby’s Cafeteria brand, said Chris Pappas, Luby’s president and CEO, in an earnings call Friday.
“While the decline is disappointing, we are pushing to improve our sales,” Pappas said.
Luby's Cafeteria same-store sales decreased 0.2 percent, the company said. However, Pappas noted that Luby’s guest traffic was up 3.7 percent in the quarter, but that was offset by a 3.9 percent decline in average spend per guest because of promotional deals.
The Luby’s promotions included targeted offers to loyal e-club guests for buy-one-get-one free offers to increase traffic on specific days, Pappas said.
“Pressure on consumer spending appears to be impacting overall restaurant guest traffic and competitors’ same-store results,” Pappas said. “Many sectors of the restaurant industry are reporting declines in same-store sales. We believe we experienced some of that pressure in the third quarter also.
Same-store sales at the Fuddruckers burger brand slid 1 percent in the quarter, and at Cheeseburger in Paradise they fell 3.3 percent.
Pappas said he was encouraged by the increased Luby’s Cafeteria guest traffic, which was up despite heavy rains in the brand’s chief Texas market.
Record rains and flooding in Houston, especially on April 18, led to decreased sales, said Scott Gray, Luby’s chief financial officer. About 30 percent of Luby’s Texas restaurants are in the Houston market, he said. Without the weather impact, Gray said same-store sales would have been flat to slightly up.
The company is also emphasizing new menu options at its burger and cafeteria brands, Pappas said.
Fuddrucker’s is expanding its menu with new salads such as kale salad and a Cobb salad as well as a double-stack cheeseburger, he said, and Luby’s is emphasizing manager’s specials such as Asian stir-fry and pasta dishes.
Gray said commodity costs were favorable in the quarter, especially for lowered beef prices.
Luby’s opened four new Fuddruckers franchise restaurants during the quarter, including an international location in Bologna, Italy. A fifth location opened in early June in Bogota, Colombia, which was the second location in that South American country.
Luby’s ended the third quarter on June 1 with a loss of $134,000, or 1 cent a share, down from a profit of $2.4 million, or 8 cents a share, in the comparable period last year. Sales in the quarter fell 2.1 percent, to $92.1 million from $94.1 million in the prior-year period.
Luby's Inc. operates 178 restaurants nationally, including 92 Luby's Cafeterias, 77 Fuddruckers, eight Cheeseburger in Paradise restaurants and one Bob Luby's Seafood Grill. The company franchises 115 Fuddruckers locations across the United States, Puerto Rico, Canada, Mexico, Italy, the Dominican Republic, Panama, Poland, Chile,and Colombia. A licensee operates 35 Fuddruckers restaurants in the Middle East.
Luby's Culinary Contract Services division provides foodservice management to 26 healthcare, higher education and corporate dining locations.