Potbelly (PBPB) Tops Q4 EPS by 3c, Revenues Miss

Potbelly (NASDAQ: PBPB) reported Q4 EPS of $0.05, $0.03 better than the analyst estimate of $0.02. Revenue for the quarter came in at $102.4 million versus the consensus estimate of $103.64 million.

• Total revenues decreased 8.7% to $102.4 million from $112.1 million.
• Company-operated comparable store sales decreased 1.7%, adjusting for the impact of the 14th week.
• 7 new shops opened, including 4 company-operated shops and 3 franchised shops; 9 shops closed, including 2 company-operated shops and 7 franchised shops.
• GAAP net loss attributable to Potbelly Corporation was $4.4 million, inclusive of a $5.1 million impairment charge and $0.4 million of discrete tax expense compared to a loss of $7.3 million, inclusive of a $5.0 million impairment charge and $5.7 million of discrete tax expense. GAAP diluted loss per share improved to $0.17 from $0.29.
• Adjusted net income1 attributable to Potbelly Corporation decreased to $1.2 million from adjusted net income of $2.2 million. Adjusted diluted earnings per share1 decreased to $0.05 from $0.08.
• EBITDA1 decreased to $0.2 million from $3.9 million.
• Adjusted EBITDA1 decreased to $7.2 million from $11.1 million.

Alan Johnson, President and Chief Executive Officer of Potbelly Corporation, commented, “We are pleased with our performance in the fourth quarter and full year 2018, as we took significant steps forward and made great progress towards the execution of our turnaround plan to reposition the company to return to profitable growth. Our objectives for 2018 were to learn what it takes to positively impact same store sales and learn how to drive industry-beating traffic trends – and I believe we accomplished these goals. Our traffic trends in the fourth quarter outperformed the broader Fast Casual industry within our markets for the second consecutive quarter. In addition, we are pleased to report that we achieved same store sales and earnings for the full year ahead of our expectations.”

Johnson, continued, “2018 was a transition year for Potbelly. While we achieved meaningful progress in 2018 and demonstrated that we can improve our same store sales and traffic trends, we recognize that there is still much more work yet to be done to turn the business around. As we look to 2019, our main priorities are to generate positive same store sales and to drive profitability. We are optimistic about our ability to continue to improve our same store sales trajectory and are planning for positive same store sales growth for the first time in a few years. Our optimism is fueled by three key initiatives. First, this month we rolled out our new menu in all of our shops that was tested successfully in 2018. We originally slated the rollout for the second half of this year, but were so encouraged by the results that we accelerated the timetable. Second, we now offer delivery in all of our shops along with expanded delivery windows as we continue to see off-premise as an attractive avenue for growth. Third, we plan to increase our Marketing investment substantially in 2019 to increase our unaided brand awareness, attract new customers and retain more of them. We remain committed to testing new ideas to improve our traffic and same store sales trends in a way that builds the foundation for long-term sustainable profit growth.”

2019 Outlook

For the full fiscal year of 2019, management currently expects:

• 12-20 total shop openings, including 6-10 company-operated shop openings, and 12-20 total shop closures, including 6-10 company-operated shop closures;
• Company-operated comparable store sales growth in range of 0.5% to 1.5%;
• An effective tax rate between 22%-24%, excluding the impact of ASU 2016-09; and
• Adjusted EBITDA between $30.0-$33.0 million, excluding the impact of ASC 842.

For earnings history and earnings-related data on Potbelly (PBPB) click here.

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