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Soft sales trends dog Zoe’s Kitchen into 2Q

Fast-casual brand lowers guidance, says it will slow development

Soft sales trends in the first quarter led Zoe’s Kitchen Inc. to lower its guidance for the fiscal year and warn that it would be slowing future new-unit development, the company said Thursday. 

With same-store sales down 2.3 percent in the quarter ended April 16, the Plano, Texas-based fast-casual Mediterranean brand said it was lowering guidance for the fiscal year to a decline of 2 percent to 4 percent in same-store sales, down from an earlier forecast of flat to 2 percent. 

“Weather and calendar shifts aside, trends softened sequentially from the fourth quarter of 2017 primarily due to decelerating dine-in traffic,” said Kevin Miles, Zoe’s president and CEO, in a statement. “Early results in the second quarter have not shown significant improvement, necessitating a downward revision to our annual guidance.”

Miles said the company was focusing on “aggressive actions” to build sales and improve financial performance.

“We will slow our future new-unit growth and conduct a thorough review of under-performing restaurants,” Miles said. The company is also taking steps to reduce general and administrative costs and “will re-allocate resources toward marketing and technology initiatives to drive sales,” he said.

For the first quarter, Zoe’s swung to a net loss of $3.6 million, or 19 cents a share, from a profit of $19,000, or zero cents a share, in the same period last year. Revenues increased 12.7 percent to $102.1 million from $90.6 million in the prior-year period.

In guidance, the company said it was revising total revenue for the year to a range of $345 million to $352 million, which was lowered from earlier guidance of $358 million to $368 million. 

While the company is slowing future development, it said it still planned to open about 25 restaurants in this fiscal year. So far this year, it has opened 15 of those, the company said. 

“We are fully committed to reversing our traffic trends and our team is laser-focused on operational execution and sales driving initiatives, Miles said. 

As of May 24, the Zoës Kitchen concept, founded in 1995, has 258 locations in 20 states. 

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

TAGS: Fast Casual
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