Luby's was founded in 1911 in Springfield, Missouri and currently (at the time Case 22 was published in 1999) has 223 locations in 11 states throughout the Midwestern, Southern and Southwestern US. Luby's is a publicly traded company on the New York Stock Exchange with no single organization owning more than 5.7 percent of its stock. Barry Parker, who is the company's president/CEO, is dealing with a falling stock price and profit margins that have been considerably shrinking over the past few years. The following S.W.O.T. analysis will try to pinpoint Luby's strategic issues or problems they are facing as well assist in providing alternative solutions and a final recommendation in handling these issues.
Luby's has experienced an increase in sales revenue from $390,692,000 in 1994 to $508,871,000 in 1998. They have also increased their occupancy from 113,546,000 in 1994 to 154,501,000 in 1998, which would seem to coincide with the increased sales revenue.
From 1997-1998, Luby's experienced a return on their investments of 11.0% compared to an industry average of only 8.6%. Their debt-to-equity for the 1997-1998 period is also very impressive at a low .5 compared to an industry 2.5.
The first, and probably most important, weakness Luby's is facing is the shrinking profit margins. Net income has lowered from $39,335,000 in 1994 to only $5,081,000 in 1998. This is primarily due to an increase in operating expenses from $331,642,000 in 1994 to a staggering $497,692,000 in 1998. Of these increased operational costs during the 1994-1998 time period, food costs have risen approximately 31%, payroll has risen 48.4%, provisions for store closings have cost $49,284,000 and general & administrative expenses have risen 43.9%. Luby's also has a weakness that isn't as noticeable, involving its brand recognition. When most people think of Luby's, they think...