Noodles & Company’s stock price took a dive Friday after the company issued a conservative outlook for the year in its first earnings report as a public company.
On Friday, the Broomfield, Colo.-based chain’s stock dropped more than 10 percent to close at $42.31 after reaching highs of $51.97 following its successful initial public offering on June 28. The company’s stock doubled in price on the first day of trading, indicating high investor hopes for the fast-casual brand.
However, those hopes seemed to dampen somewhat after the company reported its second quarter results last week, despite a respectable nearly 36-percent increase in adjusted net income to $4 million, or 13 cents per share, including the savings of debt extinguishment from the $100 million in proceeds from the IPO. Revenue increased 18.2 percent to $89.2 million on systemwide same-store sales that grew 4.4 percent.
For the year, however, the company projected adjusted net income per share between 39 cents and 41 cents, and same-store sales growth of about 3 percent.
During a call following the release of earnings, analysts questioned why expectations for the year were so conservative. Kevin Reddy, Noodles & Company’s chief executive, cited macroeconomic headwinds, particularly in early July, that appeared to have an impact industrywide.
The July 4 holiday falling on a Thursday could have been a factor, he said, and the timing of family vacations or back-to-school spending could have limited consumer discretionary income. But, in general, “folks are maintaining being cautious,” he said.
Since early July, however, same-store sales at Noodles have accelerated to more typical levels, he said. “We will have increased momentum in the fourth quarter, but the prudent guidance is 3 percent.”
Focusing on service, seasonal ingredients
During the call with analysts Reddy also said that Noodles & Company is continuing to test various versions of an enhanced service program designed to boost dinner sales.
Dubbed PLUS, an acronym for Please Let Us Serve, the program includes the addition of hosts to the dining room floor in late afternoon to offer another layer of table service. The hosts will offer services such as offering water or getting another beverage or dessert so guests don’t have to get back in line at the counter.
Reddy said Noodles’ ability to excel at dinner is a point of differentiation in the increasingly crowded fast-casual segment, where most concepts shine at lunch.
While pleased with the test so far, Reddy said the company will maintain its “patient and slow — maybe too slow” expansion of the service model to make sure they get it right.
“We want to give each region an opportunity to understand the nuances,” said Reddy. “Consumer needs and behaviors are different at different dayparts. This is an area where guests will be able to choose to opt in.”
In menu developments, the chain has switched from its successful asparagus-focused limited-time offer to one that features sweet corn, which is now in season. The Garden Pesto Sauté includes charred sweet corn in a light lemon Genovese pesto tossed with gluten-free fusilli noodles, red bell peppers, mushrooms, onions, pecans, feta and spinach.
The summer vegetable is also a star on a new summer flatbread appetizer topped with slow-cooked pork, charred corn, feta, spinach, Parmesan and tomatoes.
“Our teams are shucking corn every morning in restaurants,” he said Reddy, who noted that the chain is focusing on seasonal ingredients.
Coming in October is a fall LTO that Reddy said is the chain’s most requested dish: a Parmesan Alfredo that will feature an Italian montamoré cheese, which Reddy described as sweet and fruity.
Contact Lisa Jennings at firstname.lastname@example.org.
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