Potbelly (PBPB) Misses Q1 EPS by 9c, Revenues Miss, Comp Sales Down 4.7%

Potbelly (NASDAQ: PBPB) reported Q1 EPS of ($0.12), $0.09 worse than the analyst estimate of ($0.03). Revenue for the quarter came in at $98.1 million versus the consensus estimate of $101.09 million.

• Total revenues decreased 4.7% to $98.1 million from $102.9 million.
• Company-operated comparable store sales decreased 4.7%.
• Three new shops opened, including one new company-operated shop and two franchised shops; eight shops closed, including seven company-operated shops and one franchised shop.
• GAAP net loss attributable to Potbelly Corporation was $18.4 million, inclusive of a $13.6 million charge related to a valuation allowance on deferred tax assets, and a $0.0 impairment charge compared to a loss of $2.2 million, inclusive of a $0.0 million charge related to a valuation allowance on deferred tax assets, and a $2.0 million impairment charge. GAAP diluted loss per share was $0.76 compared to a GAAP diluted loss per share of $0.09.
• Adjusted net loss1 attributable to Potbelly Corporation was $3.0 million compared to adjusted net income of $0.7 million. Adjusted diluted EPS1 was a loss of $0.12 compared to adjusted diluted EPS of $0.03.
• EBITDA1 decreased to $0.7 million from $3.2 million.
• Adjusted EBITDA1 decreased to $3.9 million from $7.6 million.

Alan Johnson, President and Chief Executive Officer of Potbelly Corporation, commented, "Our company-operated same store sales were negatively impacted by the government shutdown and the unseasonably cold temperatures across our key markets during the first half of the first quarter. Consequently, we delivered revenue of $98.1 million, adjusted EBITDA of $3.9 million, and adjusted net loss of $0.12 per share in the first quarter of 2019.”

Johnson continued, “Despite the soft start to the year, we maintain our relentless focus on executing our strategic initiatives to turn around the business. We are encouraged by the many initiatives that are working, led by our menu optimization initiative which has exceeded our expectations, consistent growth in our off-premise business, growth in our Potbelly Perks registrants and greater customer engagement and loyalty, and the significant progress we have made in the development of our Shop of the Future concept. We are encouraged by the positive momentum in our franchise pipeline in the first quarter, where we signed two new franchisees with plans to open over 20 new shops over the next few years, which is about half the number of domestic units we have today. Unfortunately, the incremental advertising investment that we launched in the second quarter has not generated the expected returns. As a result, we are taking a step back to assess our marketing effort, and we expect to take our learnings and apply them with a fresh approach to drive a more productive outcome.”

2019 Outlook

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

• 12-18 total shop openings, including 6-8 company-operated shop openings;
• 15-22 total shop closures, including 9-12 company-operated shop closures;
• Flat to low-single digit decrease in company-operated comparable store sales; and
• Adjusted EBITDA between $25.0-$30.0 million, excluding the impact of ASC 842.

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

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