On the brink: Sbarro braces for the great shopping mall recession
Jun 4th 2009 10:30AM
Updated Dec 4th 2009 1:43PM
Pizza and pasta: on the great laminated menu of American comfort foods, they rank just below cheeseburgers and a notch above burritos. No American restaurant chain may be more closely associated with red-sauce favorites than Sbarro. Based in Melville, New York, Sbarro has nearly 1,100 restaurants in 45 countries, But after decades of worldwide expansion, the company, founded by Italian immigrants in Brooklyn half a century ago, may have to cool its ovens for good.
Sbarro's fate is largely tethered to the success of shopping malls -- and the malls have been devastated by the economic downturn. Same-store sales in the nation's malls were down 6.5 percent for the year ended March 31, as budget-conscious consumers increasingly stayed home.
Beyond competing with the recession, Sbarro also faces competition in the frozen-foods aisle. ABC News recently named frozen supermarket pizzas on its list of America's Nine Favorite Recession Foods; even a "gourmet" brand is cheaper than Sbarro's $17.99 pepperoni pie (especially after you've added in drinks and tax).
Can Sbarro ride out the recession? Perhaps, but the outlook isn't appetizing. With its focus in the malls, testing a breakfast or after-hours menu isn't really a sensible option (though Sbarro outlets are also at airports and highway road stops). The privately-held company also has higher debt and less cash flow than competitors like Domino's and Pizza Hut. For the first quarter this year, Sbarro reported a net loss of $5.7 million, up from $2.8 million for the quarter a year earlier. Moody's rates the company as a "very high" credit risk.
All of which landed Sbarro on U.S. News & World Report's most unwanted list: 15 Companies That Might Not Survive 2009. Even Comedy Central faux-commentator Stephen Colbert has weighed in: the finest cheeses are aged, he noted, "and no cheese slice sits out longer than the ones at Sbarro." But he went on to vent about how the parmesan in the chain's restaurant shakers are sometimes so old that it clumps together.
Would a world (or a mall) without a Sbarro be such a terrible thing? For consumers who can't live without its mushy spaghetti and gummy pizza, then Sbarro's struggles are a cause for concern. But with missionary celebrity chefs like Mario Batali helping to improve American Italian food, maybe it's time for us to fold up the red-and-white checkered tablecloths and move on.
See more iconic American companies on the brink.