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Noodles & Company CEO: Net income, sales fail to meet expectations, progress underway

Although Noodles & Company CEO Kevin Reddy admits the chain missed the mark regarding Q2 net income and sales, he said there is considerable progress in refining culinary and marketing initiatives arriving later this year.

August 7, 2015

Although Noodles & Company CEO Kevin Reddy admitted the chain missed the mark regarding net income and sales for Q2, he said the company made considerable progress in refining the culinary and marketing initiatives that will be implemented later this year.

Adjusted net income decreased to $3.1 million, from $3.7 million, and adjusted earnings per diluted share decreased to $0.10 from $0.12, according to the chain’s earning’s call Thursday.

"As we have discussed in the past, we believe strongly that executing an integrated marketing campaign communicating our commitment to real cooking, as well as pure and wholesome ingredients, will significantly elevate our brand awareness and help us meet today's guest expectations," he said. "We are committed to bringing this marketing campaign to life during the balance of the year, as well as key culinary and operational initiatives that will allow us to capitalize more fully on our strength with millennial families."

Key highlights for the second quarter of 2015 versus the same quarter a year ago included:

• Total revenue increased 15.9 percent to $115.2 million from $99.5 million.
• Comparable restaurant sales increased 0.1 percent for company-owned restaurants, decreased 0.5 percent for franchise restaurants and were flat systemwide.
• Restaurant contribution margin decreased to 18.6 percent from 20.4 percent.
• 17 new restaurants opened systemwide in the second quarter, including 11 company-owned and six franchise restaurants.
• Adjusted EBITDA increased to $12.7 million from $12.6 million.

"During the second quarter we had a successful opening at our initial restaurant in Toronto, and we made progress in our underperforming markets," Reddy said. "While our comparable restaurant sales and net income in the second quarter fell below our expectations, the underlying business model remains strong, as evidenced by an increase in adjusted EBITDA compared to the prior year and the generation of $22.7 million of cash flow from operations during the second quarter of 2015

“Additionally, we repurchased $6.3 million of common stock as part of our recently announced share repurchase program. While we anticipate comparable sales and net income results for the balance of the year to be muted as we invest in sales-building initiatives while facing incremental labor cost pressure, we feel strongly that these initiatives will ultimately improve our awareness and positioning with guests, increase sales and grow earnings."