Noodles & Company officials partly attributed lower second-quarter profits to harsh winter weather in the eastern U.S.
The opening of 16 new restaurants during the quarter ended July 1 helped revenue rise 11.5 percent, to $99.5 million, from $89.2 million in the comparable period. However, profit declined to $3.7 million, from $4 million in 2013.
Systemwide same-store sales at the 410-unit Broomfield, Colo.-based chain sank 0.7 percent, divided between a decrease of 0.6 percent at company-owned restaurants and 1.2-percent at franchised restaurants.
According to chairman and chief executive Kevin Reddy, spring didn’t deliver an expected sales rebound, particularly in the chain’s Mid-Atlantic market, home to some of its highest-performing units and 20 percent of its locations overall. Summer warmth, however, has helped.
“Following the bad weather impact in Q1, we expected to see sales return to a more typical pattern in Q2,” Reddy said.
The company endured some overall sales softness in May before momentum returned in June. The overall sales uptick “has been slower to materialize than we had anticipated.”
Reddy told analysts on the call that thus far in the third quarter, the company is enjoying a 1.3-percent increase in same-store sales, but he expects Noodles & Company to finish 2014 flat. Despite strong performance in new markets such as San Francisco’s Bay Area, Orlando, Fla., and Boston, the company will be cautious about its same-store sales and earnings-per-share forecast for full-year 2014, he added.
“Though our business plan is for 2.5- to 3-percent annual sales growth, we do feel it is judicious to temper full-year comp sales and EPS predictions slightly,” Reddy said, without giving specifics.
The company said customers responded well to limited-time offers of its Asparagus di Parma, and the return of its Backyard Barbecue Salad and flatbread offerings during the period. It raised menu prices 1.75 percent in the second quarter. Another 2-percent increase will follow in October with the launch of an undisclosed fall limited-time offer.
The company expects to meet its target of 40 to 50 new restaurant openings in 2014, and it says newly launched initiatives to spur dinner sales and a new catering offering will invigorate same-store sales.
Catering, Reddy added, will be available in all company restaurants by the end of August, and he expects it to contribute an additional 1.5 percent of topline sales growth by the end of the year.
Noodles & Company also reported steady growth in the use of its online and mobile platforms, which allow guests to skip the regular queue at the counter when they arrive for pickup. Currently, digital platforms account for 4 percent of sales, double the share six months ago.
Reddy said he is confident the brand is well positioned for growth in sales, earnings per share and restaurants. He said leadership remains confident the brand would some day have 2,500 units, and that as the American economy continues to improve, sales will follow in step.