Potbelly (PBPB) Tops Q3 EPS by 5c

Potbelly (NASDAQ: PBPB) reported Q3 EPS of $0.04, $0.05 better than the analyst estimate of ($0.01). Revenue for the quarter came in at $104.2 million versus the consensus estimate of $103.76 million.

Key Highlights for the thirteen weeks ended September 29, 2019 compared to the thirteen weeks ended September 30, 2018 include:

• Total revenues decreased 2.6% to $104.2 million from $107.0 million
• Company-operated comparable store sales decreased 3.0%
• 1 new shop opened; 3 shops closed, including 2 company-operated shops and 1 international franchise shop
• GAAP net loss attributable to Potbelly Corporation was $2.4 million, compared to a loss of $2.0 million, which included impairment charges of $1.7 million and $4.4 million, respectively; GAAP diluted loss per share was $0.10 compared to a GAAP diluted loss per share of $0.08
• Adjusted net income1 attributable to Potbelly Corporation was $0.9 million compared to adjusted net income of $2.4 million; Adjusted diluted EPS1 was $0.04 compared to adjusted diluted EPS of $0.09
• EBITDA1 increased to $3.1 million from $3.0 million
• Adjusted EBITDA1 decreased to $7.8 million from $8.8 million
• Menu optimization efforts led to a 580 basis point improvement in check versus the third quarter of 2018, driven by a combination of price and mix
• Company recently announced a nationwide partnership with Grubhub to further accelerate growth in the Off-Premise and Digital Channel

Alan Johnson, President and Chief Executive Officer of Potbelly Corporation, commented, “Our results reflect continued progress across our strategic initiatives. Menu optimization efforts have grown average check, Off-Premise and Digital growth has accelerated, and our franchising team has been incredibly successful this year. We delivered substantially better year-over-year Adjusted EBITDA in the third quarter, relative to the first half of 2019, primarily due to reductions in discounting and advertising. However, while our four pillars and strategic initiatives are working, the pace and impact of the changes have not been strong enough to offset the impact of weaker traffic. Therefore, over the last quarter, we have invested in a number of internal and external activities to accelerate our transformation and improve our focus on the fundamentals. Through this work, and the momentum that we’ve built with our strategic priorities, we believe that this will result in a series of quick wins that will not only improve our customer satisfaction results, but also help with traffic and retention.”

2019 Outlook

Based on current expectations for the fourth quarter of 2019, management reiterates its same-store sales and profitability guidance, but updated its Adjusted G&A and shop openings outlook, and currently expects:

• Flat to low-single digit decrease in company-operated comparable store sales
• Adjusted EBITDA to be between $25.0 million and $30.0 million, including the impact of ASC 842
• Cost of goods sold to be between 26.7% and 27.3%
• Labor as a percentage of sales to be between 31.0% and 32.0%
• Adjusted G&A expense to be between $40.0 million and $42.0 million
• 15-22 total shop closures, including 9-12 company-operated shop closures
• Management slightly lowered its expected total shop openings to 8-13 versus the previously communicated 10-15, which includes 2-3 company-operated shop openings, a slight reduction from the previously communicated 4-5

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

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