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Wall Street bullish on Potbelly

Wall Street bullish on Potbelly

Company raises $105 million in IPO, share price more than doubles

On its first day of trading Friday, Potbelly Corp.’s share price more than doubled — from a $14 offering price to a close at $30.77 — outperforming first-day trading of other recent restaurant IPOs, including that of Noodles & Company.

Potbelly’s share price gain of nearly 120 percent bested the first-day increase on June 28 from Noodles, which opened at $32 per share and closed 15-percent higher at $36.75.

Chicago-based Potbelly offered 7.5 million shares at an initial price of $14, raising about $105 million in its IPO Friday. The pricing surpassed the $75 million projection Potbelly had initially outlined in late August.

Potbelly indicated in its initial filing with the Securities & Exchange Commission that it plans to grow its number of locations by 10 percent annually over the long term, through company-owned stores and “disciplined” franchising. Of the brand’s 286 sandwich shops, only six domestic locations are franchised, and its 12 international units are franchised as well.

According to the Nation’s Restaurant News Top 200 census of the largest foodservice brands, Potbelly booked estimated U.S. systemwide sales of about $261 million for the year ended in December 2012, placing it at No. 127.

For the past three fiscal years and through the first 26 weeks of fiscal 2013, Potbelly recorded unit-level profit margins above 20 percent and cash-on-cash returns for new company-operated restaurants above 25 percent after two full years of operation, according to the company’s filing. The brand’s average unit volume is “in excess of $1 million,” according to the S-1 document.

All three major stock indices closed between 0.5 percent and 1 percent higher on Friday, despite the federal government shutdown causing the postponement of new economic data from the Department of Labor. The SEC is not affected by the shutdown.

The NRN Restaurant Stock Index rose 0.6 percent Friday. Year to date, the NRN index has risen 18 percent.

Contact Mark Brandau at [email protected]
Follow him on Twitter: @Mark_from_NRN

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