In the category of "you can't make this stuff up," it appears as though Texas-based restaurant chain Luby's (LUB) , perhaps best known for its cafeteria style restaurants, is taking a page out of the Bob Evans (BOBE) playbook. The company announced yesterday that it has expanded its partnership with grocery retailer H-E-B and will begin offering its branded fried fish (frozen variety) in 270 stores across Texas. This announcement follows the introduction of Luby's mac 'n' cheese at H-E-B stores in early December.
This move is a toe in the water for Luby's compared to Bob Evans, which recently announced the sale of its restaurant operations in order to concentrate on its prepared food business. Luby's move into frozen foods is part of a growing trend of restaurant chains trying to grab eat-at-home market share. Beyond Bob Evans, Boston Market, P.F. Chang, California Pizza Kitchen, and TGI Friday's are among other chains selling their wares in the frozen food aisles these days. (All but TGI Fridays were once publicly traded).
Whether this move will bear fruit for Luby's remains to be seen, but the company needs to do something in order to get noticed. The stock currently is trading near an eight-year low and the company has not had a profitable quarter since the third quarter of 2015. It has been an utter disappointment to investors and its "value" leanings are looking more like a value trap.
Luby's has many of the elements I look for in a deeper value play. Currently trading at just 0.76x tangible book value per share, the company is asset-rich. Luby's owns the land and buildings for 91 locations, which is compelling given the company's total enterprise value of $142.5 million. Besides operating Luby's restaurants, the company is also the parent of the Fuddruckers chain, which it purchased out of bankruptcy in 2010 for $61 million. That chain's burgers were among my favorite, although our local Fuddruckers closed years ago and the closest one is now 50 miles away, and the last time I ate at one was in Montana many years ago.
Unfortunately, the name is lost in a sea of other publicly traded restaurant chains, has no analyst coverage and has not given anyone reason to take notice. The Pappas family, brothers Harris (former COO, age 73) and Christopher (current president and CEO, age 70), together own or control nearly 35% of the company's stock. Last year, Christopher Pappas made nearly $705,000 running the company, a great paycheck, especially considering that Luby's has not had a profitable year since 2013. Senior vice president K. Scott Gray earned total compensation of $530,000, while COO Peter Tripoli earned $606,000.
With challenged performance and little or no interest by investors or analysts but a potentially valuable real estate portfolio, this company might benefit from an activist poking around. However, given the Pappas' control, it is likely that most activists have better fish to fry.