Luby's Reports Third Quarter Fiscal 2020 Results

Rhea-AI Summary

Luby's, Inc. (NYSE: LUB) reported its unaudited financial results for the third quarter of fiscal 2020, ending June 3, 2020. Restaurant sales fell by 78.9% year-over-year, totaling $13.8 million compared to $65.6 million in Q3 2019, primarily due to COVID-19 impacts. The company anticipates $9.2 million in property sales by August 2020. Operational changes improved margins, with positive store-level profit of approximately $1 million in June 2020. Luby's plans to pursue sales of its assets and distribute proceeds to shareholders.

Positive

• Achieved approximately $1 million in store-level profit in June 2020 from operational adjustments.
• Reduced general and administrative expenses by over 50% through restructuring.
• Anticipated property sales of approximately $9.2 million by the end of fiscal 2020.

Negative

• Total restaurant sales dropped by 78.9% from Q3 2019.
• Restaurants faced temporary closures and limited service due to COVID-19 restrictions.
• Uncertainty regarding the pandemic could materially impact future results.

HOUSTON, July 20, 2020 /PRNewswire/ -- Luby's, Inc. (NYSE: LUB) ("Luby's") today announced unaudited financial results for its twelve-week third quarter fiscal 2020 ended June 3, 2020, referred to as "third quarter."  Comparisons in this earnings release are for the third quarter compared to the twelve-week third quarter fiscal 2019.

Third Quarter Restaurant Sales: ($ thousands)
Restaurant Brand	Q3 2020	Q3 2019	Change ($)	Change (%)
Luby's Cafeterias	$	11,857		$	44,930		$	(33,073)		(73.6)	%
Combo locations	540		4,591		(4,051)		(88.2)	%
Luby's cafeteria segment	12,397		49,521		(37,124)		(75.0)	%
Fuddruckers restaurants segment	1,405		15,312		(13,907)		(90.8)	%
Cheeseburger in Paradise segment	30		778		(748)		(96.1)	%
Total Restaurant Sales	$	13,832		$	65,611		$	(51,779)		(78.9)	%

Luby's restaurant sales were significantly impacted (like all restaurant operators) by the unprecedented nature of the COVID-19 pandemic and sate and local governments' responses, which resulted in temporary store closures and limited service at operating stores.

Restaurant Counts:
	August 28, 2019		FY20 YTDQ3 Openings		FY20 YTDQ3 Closings		June 3, 2020
Luby's Cafeterias(1)	79			—			(3)			76
Fuddruckers Restaurants(1)	44			—			(13)			31
Cheeseburger in Paradise	1			—			—			1
Total	124			—			(16)			108
(1)     Includes 6 restaurants that are part of Combo locations

 

As of the date of this release, Luby's is operating 43 stand-alone Luby's Cafeterias, 3 Combo locations, and  17 Fuddruckers Restaurants.   The remaining locations (included in the restaurant counts as of June 3, 2020 above) were classified as temporarily closed.

Previously announced results of strategic review process conducted by Luby's Board of Directors

On June 3, 2020, we announced that our Board of Directors approved a course of action whereby we will immediately pursue the sale of our operating divisions and assets, including real estate assets, or the sale of the Company in its entirety, and distribute the net proceeds to our stockholders after payment of debt and other obligations. During the sale process, many of our restaurants will remain open.

Comments related to our operations in the context of COVID-19

Beginning in May 2020, we began to gradually reopen the dining rooms with state-mandated limits on guest capacity at the 28 Luby's Cafeterias  locations and 3  Fuddruckers locations that had been previously operating with food-to-go service only. We also began to reopen restaurants that were temporarily closed. As of June 3, 2020, there were 31 Luby's Cafeteria's and Combo locations, and 8 Fuddruckers restaurants operating, all of which had their dining rooms open at limited capacity.  There were 59 franchise locations in operation as of June 3, 2020. We are continuing a gradual reopening of our restaurants and as of the date of this release there were 46 stand-alone Luby's Cafeteria's and Combo locations and 17 Fuddruckers Restaurants operating with dining rooms open at limited capacity and there were 64 franchise locations in operation. By the end of the fiscal third quarter, for the stores that were in operation, we were achieving weekly sales levels in excess of 80% of prior year levels at our cafeteria brand and in excess of 70% at our Fuddruckers brand. Approximately 40% of our restaurant sales were for off-premise dining (food-to-go and delivery).  At these sales levels and with a re-defined operating model, we are generating positive store level profit, in the aggregate, at these 46 cafeteria and 18 Fuddruckers locations. Within our Culinary Contract Services segment, we continue operations at each of our clients' hospital locations.  In addition, we experienced increased demand for our Luby's-branded frozen packaged good products that are sold through HEB, our third-party grocery retail partner in Texas.

In response to the changed operating environment as a result of  the COVID-19 pandemic, we took the following actions:

• We revamped restaurant operations to generate cost efficiencies resulting in higher restaurant operating margins even while sales levels have not returned to pre-COVID-19 pandemic levels. As the restaurants adapted to the new operating environment, a lower labor cost model was deployed, food costs declined as menu offerings were concentrated among the historically top selling items, and various restaurant service and supplier costs were reevaluated. As a result of these changes, we achieved store level profit of approximately $1.0 million in the last month of our fiscal third quarter at the restaurants that were operational.
  
  
• We began restructuring corporate overhead earlier in calendar 2020 prior to the COVID-19 pandemic, including a transition to a 3rd party provider for certain accounting and payroll functions. Significant further restructuring took place in April, May, and June of 2020, as we reviewed all corporate service providers, information technology needs, and personnel requirements to support a reduced level of operations going forward.  As a result of these restructuring efforts that began earlier in calendar 2020 and accelerated as a result of the pandemic, we have reduced our general and administrative expense by over 50%.
  
  
• In addition to the approximate $7.2 million proceeds in property sales achieved in fiscal 2020 through the third quarter, we generated an additional $10.7 million in in June 2020 and anticipate an additional $9.2 million proceeds from property sales before the end of fiscal 2020 in August.

As of this release, the uncertainty regarding the spread of the COVID-19 pandemic and the timing of the economic recovery, could continue to materially impact our results of operations and cash flows.

About Luby's

Luby's, Inc. (NYSE: LUB) operates two core restaurant brands: Luby's Cafeterias and Fuddruckers. Luby's is also the franchisor for the Fuddruckers restaurant brand. In addition, through its Luby's Culinary Contract Services business segment, Luby's provides food service management to sites consisting of healthcare, corporate dining locations, sports stadiums, and sales through retail grocery stores.

This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release, other than statements of historical fact, are "forward-looking statements" for purposes of these provisions, including the statements under the caption "Outlook" and any other statements regarding scheduled openings of units, scheduled closures of units, sales of assets, expected proceeds from the sale of assets, expected levels of capital expenditures, effects of food commodity costs, anticipated financial results in future periods and expectations of industry conditions.

Luby's cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time-to-time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of Luby's. The following factors, as well as any other cautionary language included in this press release, provide examples of risks, uncertainties and events that may cause Luby's actual results to differ materially from the expectations Luby's describes in such forward-looking statements: general business and economic conditions; the impact of competition; our operating initiatives; fluctuations in the costs of commodities, including beef, poultry, seafood, dairy, cheese and produce; increases in utility costs, including the costs of natural gas and other energy supplies; changes in the availability and cost of labor; the seasonality of Luby's business; changes in governmental regulations, including changes in minimum wages; the effects of inflation; the availability of credit; unfavorable publicity relating to operations, including publicity concerning food quality, illness or other health concerns or labor relations; disruptions to our business from the COVID-19 pandemic, including the duration of government mandated and voluntary shut-down of our operations, the speed with which the Company's restaurants can safely be reopened, the level of guest demand following reopening, and the impacts on our financial resources and liquidity; the continued service of key management personnel; and other risks and uncertainties disclosed in Luby's annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-k..

 

Luby's, Inc. Consolidated Statements of Operations (unaudited) (In thousands, except per share data)
	Quarter Ended		Three Quarters Ended
	June 3, 2020		June 5, 2019		June 3, 2020		June 5, 2019
	(12 weeks)		(12 weeks)		(40 weeks)		(40 weeks)
SALES:
Restaurant sales	$	13,832			$	65,611			$	157,781			$	222,079
Culinary contract services	4,963			7,571			21,735			24,610
Franchise revenue	193			1,482			3,058			5,126
Vending revenue	6			102			130			292
TOTAL SALES	18,994			74,766			182,704			252,107
COSTS AND EXPENSES:
Cost of food	4,039			18,478			45,378			61,707
Payroll and related costs	5,487			25,015			61,402			84,258
Other operating expenses	5,766			11,491			30,625			39,404
Occupancy costs	3,696			4,023			12,470			14,064
Opening costs	—			6			14			49
Cost of culinary contract services	4,712			6,791			20,060			22,324
Cost of franchise operations	437			330			1,411			849
Depreciation and amortization	2,709			2,927			9,149			11,052
Selling, general and administrative expenses	3,339			8,623			20,313			26,386
Other Charges	164			803			2,912			3,280
Provision for asset impairments and restaurant closings	12,708			675			14,478			3,097
Net gain on disposition of property and equipment	(364)			(434)			(2,861)			(12,935)
Total costs and expenses	42,693			78,728			215,351			253,535
LOSS FROM OPERATIONS	(23,699)			(3,962)			(32,647)			(1,428)
Interest income	19			11			47			30
Interest expense	(1,641)			(1,324)			(5,076)			(4,593)
Other income, net	402			112			790			198
Loss before income taxes and discontinued operations	(24,919)			(5,163)			(36,886)			(5,793)
Provision for income taxes	53			132			210			346
Loss from continuing operations	(24,972)			(5,295)			(37,096)			(6,139)
Loss from discontinued operations, net of income taxes	(7)			(6)			(23)			(18)
NET LOSS	$	(24,979)			$	(5,301)			$	(37,119)			$	(6,157)
Loss per share from continuing operations:
Basic	$	(0.82)			$	(0.18)			$	(1.23)			$	(0.21)
Assuming dilution	$	(0.82)			$	(0.18)			$	(1.23)			$	(0.21)
Loss per share from discontinued operations:
Basic	$	0.00			$	0.00			$	0.00			$	0.00
Assuming dilution	$	0.00			$	0.00			$	0.00			$	0.00
Loss per share:
Basic	$	(0.82)			$	(0.18)			$	(1.23)			$	(0.21)
Assuming dilution	$	(0.82)			$	(0.18)			$	(1.23)			$	(0.21)
Weighted average shares outstanding:
Basic	30,398			29,874			30,206			29,732
Assuming dilution	30,398

FAQ

What were Luby's restaurant sales for Q3 2020?

Luby's reported total restaurant sales of $13.8 million for Q3 2020, a decrease of 78.9% from Q3 2019.

How did COVID-19 affect Luby's operations?

COVID-19 caused temporary store closures and limited service, significantly impacting restaurant sales.

What is Luby's plan regarding its assets?

Luby's plans to pursue the sale of its operating divisions and assets, distributing the net proceeds to shareholders.

What positive financial results did Luby's achieve in June 2020?

In June 2020, Luby's achieved a store-level profit of approximately $1 million due to operational adjustments.