Luby’s In-Line with Zacks

Luby’s, Inc. (LUB - Snapshot Report), the casual dining restaurant operator, recently reported fourth-quarter 2009 results. The company reported quarterly loss of 20 cents a share compared to a loss of 13 cents reported in the prior-year quarter. The loss per share was in-line with the Zacks Consensus Estimate.

Restaurant sales tumbled 14.7% year-on-year to $80.2 million, whereas Culinary Contract Services jumped 33.8% to $4 million. The rise in Culinary Contract Services was due to the operation of 15 facilities in the reported quarter compared to 10 facilities in the prior year quarter.

Same-store sales fell 13.6% in the quarter -- the sharpest decline registered by the company in fiscal year 2009, due to a fall in traffic counts. Store level profit dipped more than 50.0% to $4 million, whereas store level profit margin shrank 400 basis points to 5.0%.

The rise of 30 basis points in food costs to 28.8% as a percentage of restaurant sales, the jump of 290 basis points in payroll and related costs to 39.2%, and expansion of 80 basis points in other operating expense to 27.0% resulted in the fall in store level profit margin.

Restaurants in the casual dining segment are experiencing sagging comps and declining traffic with cash-strapped consumers shifting to low-priced dining options or eating at home. Other operators in the segment are Darden Restaurants Inc. (DRI - Analyst Report), Red Robin Gourmet Burgers Inc. (RRGB - Analyst Report) and Brinker International Inc. (EAT - Analyst Report).

The company also recently announced its planned closure of 25 poor performing stores in order to improve its cash flow. Of these stores, one store was closed in the fiscal fourth-quarter 2009, 5 were closed in first-quarter of 2010, and the remaining 19 will be closed in the coming two weeks.

The company also expects to generate approximately $25 million to $30 million in cash from the sale of the 28 owned properties, and employ the capital raised in projects of higher return.

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