News

Dismal Q2 results inspire Noodles & Co to scale back growth

August 4, 2016

Although Noodles & Company reported Thursday that Q2 revenue was up, it also noted that comparable sales were down. Total revenue increased 5.4 to percent to $121.4 million from $115.2 million, but comp restaurant sales decreased 0.9 percent at company-owned restaurants and 2.1 percent at franchised restaurants, resulting in a 1-percent, system-wide downtown, according to a company press release.

"Our second quarter results were below expectations in what proved to be a challenging environment for the industry,” Dave Boennighausen, CFO, said during an earning's call. "Noodles & Company remains a unique, differentiated brand with significant upside. We are working aggressively to implement important strategic decisions to regain momentum and increase shareholder value."

Boennighausen, who is serving as interim CEO until the chain replaces its former CEO Kevin Reddy, told investors that the chain would scale back unit growth and also planned to reduce corporate positions.

Other key highlights for the second quarter of 2016 versus the same quarter a year ago include:

• Nine restaurants opened system-wide in the second quarter, including eight company-owned restaurants and one franchise restaurant.
• Net loss was $14.1 million for the second quarter of 2016, or $0.51 per diluted share, compared to net income of $3.1 million, or $0.10 per diluted share, in the second quarter of 2015.
• Recorded a $10.2 million pre-tax impairment charge in the second quarter of 2016 related to 11 restaurants and recognized $0.4 million of on-going closure costs associated with restaurants closed in the fourth quarter of 2015.
• And adjusted net loss was $0.8 million, or $0.03 per diluted share, compared to adjusted net income of $3.1 million, or $0.10 per diluted share.

Boennighausen said he was confident in the potential of the chain's recent initiatives, including building off-premise sales and an increased investment in building brand awareness.

"We are also working to move the business forward through heightened communication of our World Kitchen positioning and a reevaluation of our store operating model to improve the guest experience, as well as to deliver improved unit level profitability," he said.

2016 Outlook

The company has revised guidance and currently expects the following for full-year 2016:

• Opening 45 restaurants system-wide, including 37 to 40 company-owned restaurant openings.
• Total revenue of $490 million to $500 million.
• Flat to modestly negative comparable restaurant sales growth.
• Restaurant-level contribution margin of 13.5 to 14.5 percent.
• Adjusted EBITDA of $28 million to $32 million.
• And adjusted diluted loss per share of ($0.08) to ($0.12).