Luby’s earnings continue free fall
Luby’s Inc., already ailing as diners move on from its homespun menu, reported that its sales collapsed in the quarter that ended June 3 as the coronavirus pandemic shuttered restaurants and undermined demand for dining out.
The company on Monday reported a $25 million loss for the 12week period, compared to a $5.3 million loss during the same period in 2019. Revenue fell 80 percent to $13.8 million from $65.6 million in the third quarter of 2019.
The iconic cafeteria chain, founded in 1947, was struggling to adapt to changing tastes before the pandemic hit. It announced last month it would sell its restaurant businesses and assets, including its real estate, to pay off $35 million of debt and distribute the rest of the proceeds to stockholders.
The latest round of dismal earnings throw the company’s viability
into question.
“The above conditions and events, in the aggregate, raise substantial doubt about our ability to continue as a going concern,” the company said in the quarterly report filed with the Securities and Exchange Commission.
A company spokesman did not respond to a request for comment.
As with so many other hospitality businesses, the pandemic hit Luby’s, which had already seen a dropoff in business, hard in the last quarter. The company began suspending dining at its restaurants and furloughing employees on March 17.
“By March 31, 2020, we had suspended on-premise dining at all 118 of our company-owned restaurants and had suspended all operations at 50 of our Luby's Cafeterias, 36 companyowned Fuddruckers restaurants and our one Cheeseburger in Paradise restaurant,” the company said in a press release on its previous quarter’s earnings. “The 28 Luby's Cafeterias and three Fuddruckers restaurants that remained open were providing take-out, drivethru and curbside pickup, or delivery with reduced operating hours and on-site staff.”
The company also furloughed more than 50 percent its office staff and temporarily reduced salaries by 50 percent for the remaining staff and salaried employees, including its senior management.
In addition to the internal cuts, Luby’s said revenue fell when its franchise owners “suspended operations or moved to limited food-togo operations at their locations, reducing the number of franchise locations in operation to 37 by early April 2020 from 90 prior to the COVID-19 pandemic.”
Some locations began reopening in May.
“We are continuing the gradual reopening of our restaurants,” the company said, “and as of the date of this (July 20) filing there were 46 Luby's Cafeterias and 17 Fuddruckers restaurants operating with dining rooms open at limited capacity and there were 64 franchise locations in operation.”
While saying the financial statements supplied to the SEC “have been prepared assuming that the company will continue as a going concern,” Luby’s cautioned that conditions raised “substantial” doubt about its ability to continue operations.
David Littwitz, a restaurant broker and consultant with Houston-based Littwitz Investments, said Luby’s value has fallen since the pandemic started. The restaurant business aside, he said there’s value in the real estate it owns, but “nobody’s in a hurry to do anything right now.”
Given the economic volatility of the moment, he said the assets will likely sit around for a while before a buyer would make the leap.
Chris and Harris Pappas, owners of Houston restaurants such as Pappasito’s Cantina, Pappadeaux Seafood Kitchen and Pappas Bar-B-Q, bought a majority stake of the restaurant chain in 2001. The aim was to revive the brand.
“At the end of the day I feel badly for the Pappas family and the stockholders, but they're being squeezed,” Littwitz said.