News

Zoes Kitchen to slow growth after reporting underwhelming Q1

May 30, 2018

Zoes Kitchen Inc. reported that during the 16 weeks ended April 16, 2018, revenues increased 12.7 percent to $102.1 million but that comparable restaurant sales decreased 2.3 percent over the same period in 2017.

"Our results in the first quarter were challenged as comparable restaurant sales declined 2.3 percent," Kevin Miles, president and CEO, said in the release. "Weather and calendar shifts aside, trends softened sequentially from the fourth quarter of 2017 primarily due to decelerating dine-in traffic. Early results in the second quarter have not shown significant improvement, necessitating a downward revision to our annual guidance."

Other Q1 highlights included:

• 11 company-owned restaurants opened.
• Income from operations decreased from $1.7 million to a loss from operations of $1.8 million.
• Restaurant contribution decreased 8.2 percent to $16.5 million, or 16.2 percent of restaurant sales.
• Net loss of $3.6 million, or $0.19 per basic and diluted share, compared to net income of $19.0 thousand, or $0.00 per basic and diluted share.
• Adjusted net loss of $2.6 million, or $0.13 per diluted share, compared to adjusted net income of $0.3 million, or $0.01 per diluted share.
• Adjusted EBITDA decreased 30.9 percent to $5.6 million.

While Miles said he was encouraged by results coming from investments in digital, delivery, and menu innovation, it was imperative that the company takes aggressive actions to re-focus its efforts on building sales and improving financial performance. 

"To do so, we will slow our future new unit growth and conduct a thorough review of under-performing restaurants," he said.  "Additionally, we are taking steps to reduce our G&A infrastructure and will re-allocate resources towards marketing and technology initiatives to drive sales."

FY 2018 Outlook

For the fiscal year ending Dec. 31, 2018, the company is revising its outlook as follows:
Total revenue between $345 million and $352 million (revised from $358 million to $368 million).
Comparable restaurant sales of negative 2.0 percent to negative 4.0 percent (revised from flat to 2.0 percent).
Approximately 25 company-owned restaurant openings.

"We have a strong foundation of success at Zoes Kitchen, built on high-quality fresh food, inspired by the Mediterranean lifestyle and delivered with hospitality," Miles said. "We are fully committed to reversing our traffic trends and our team is laser-focused on operational execution and sales driving initiatives. We believe the steps we are taking are right for the long-term health of the brand and to maximize shareholder value."