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.
