After stepping back from discounting and seeing second-quarter same-store sales dip, Luby’s Inc. is revisiting those offers to achieve a “better-balanced plan,” executives said on Monday.
The Houston-based company, parent to the Luby’s cafeterias and Fuddruckers burger brands, saw traffic decline as it moved away from discounting and promotional offers, said Chris Pappas, Luby’s CEO and president, in a call with analysts.
Across all Luby’s brands, same-store sales declined 3.7 percent in the second quarter ended March 14, including declines of 13.9 percent at Cheeseburger in Paradise, 6.4 percent at Fuddruckers, 5.4 percent at combination Luby’s-Fuddruckers locations and 1.8 percent at Luby’s.
The quarter, which Pappas called “challenging,” also saw the impact of a disruption in the company’s point-of-sale system that impacted about 10 percent of restaurants and reduced the volume of mobile orders through third-party channels, said Scott Gray, Luby’s chief financial officer.
The company was looking at the best balance of discounts and promotions to elevate sales after the second-quarter dip, Pappas said.
“The sales decline was due to less guest traffic as we moved away from certain discounting and promotional offers,” he said, even though average spending per customer increased in the quarter.
“We believe this approach did not generate the results we were seeking,” Pappas said. “So, beginning this quarter, we embarked on our marketing and promotional plans focused on encouraging guest frequency by delivering a compelling value offering that is better balanced with a limited and targeted pricing and discounting level.”
Frequent customers weren’t motivated by the brand’s offers, he said.
“We now believe we are rectifying this by striking a better-balanced plan with regard to discounting and promotional offers,” Pappas said. “The fundamentals of growing sales and profitability in our restaurants have not changed; our primary focus has been — and continues to be — on providing excellent guest experience.”
For the second quarter ended March 14, Luby’s narrowed its net loss to $11.2 million, or 37 cents per share, from $13.2 million, or 45 cents per share, in the same period last year. Sales fell 4.8 percent, to $82.2 million, from $86.3 million the previous year.
Peter Tripoli, Luby’s chief operating officer, said the company will replace its Fuddruckers digital app and loyalty platform this summer and introduce the first app to the Luby’s brand.
Luby’s owns and operates a total of 160 restaurants, including 86 cafeteria and combo locations with Fuddruckers, 67 Fuddruckers restaurants and seven Cheeseburger in Paradise units. In addition, Luby’s also franchises 110 Fuddruckers locations, licenses the brand to 36 units abroad, and provides contract culinary services to 24 healthcare and corporate-dining locations.
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