Franchising

Noodles and Co Q2 revenues jump, still miss estimates

Provided

August 4, 2021

Although Noodles & Co reported a 57% increase in Q2 revenue to $125.6 million, the Colorado-based chain posted quarterly earnings of 10 cents per share, missing the Zacks Consensus Estimate by a penny. That's good good news, however, when compared to last year's loss of 18 cents per share.

"We are very pleased with our second quarter results which reflect the strong momentum and the resiliency in our concept despite volatility in market conditions," CEO Dave Boennighausen said in a company press release.

He told investors Tuesday that the chain's average unit volumes reached a new record level of $1.35 million, representing 12.3% growth relative to the second quarter of 2019 and that the company achieved its highest restaurant contribution margin of 18.9% in nearly seven years.

"Our results in the second quarter reflect strength across all channels, as digital sales continued to grow as in-restaurant sales returned to 70% of pre-pandemic levels," he said. "The launch of Tortelloni in June was extremely well received by guests and our early read from our marketing analytics is showing an increase in both frequency and repurchase rates. Most importantly, we continue to be proud of our dedicated team of high performers with strong tenure and better than industry average retention and turnover."

Q2 highlights

• Total revenue increased 57% to $125.6 million.
• Comparable restaurant sales increased 56.8% system-wide, comprised of a 55.7% increase at company-owned restaurants and a 63.8% increase at franchise restaurants.
• Record Company Average Unit Volumes of $1.35 million represented a 51.5% increase compared to the second quarter of 2020 and a 12.3% increase versus the second quarter of 2019.
• Digital sales grew 15% and accounted for 56% of sales.
• Restaurant contribution margin was 18.9%, the highest since Q4 2014 and an increase of 1,220 basis points.
• Net income was $5.7 million, or 12 cents per diluted share, compared to last year's net loss of $13.5 million, or 30 cents per diluted share.

Growing strong into Q3
Boennighausen said the company was seeing strong sales momentum going into the third quarter.

"With our AUVs at an all-time high and consistent margin expansion, there is no better time for us to grow our brand," he said. "We are making strong progress in building our pipeline of both company-owned and franchise restaurant development units to achieve 7% annual system-wide unit growth in 2022 and at least 10% shortly thereafter."

CFO Carl Lukach agreed, telling investors that he anticipated total revenues of around $122 million to 126 million in Q3, "which would assume a similar trend in average unit volumes that we saw in the second quarter when compared to 2019."

As of July 30, all company-owned and franchise locations were offering in-restaurant dining at varying capacities, but considering challenges including the potential impact of the Delta COVID variant, Boennighausen wouldn't provide full financial guidance for fiscal 2021.

He said the company, however, was planning to open 10 to 15 restaurant locations this year, including eight to 11 company-owned locations.

Founded in 1995, Noodles & Company has over 450 restaurants.