May 06--Potbelly's first-quarter sales topped expectations Tuesday, aided by new restaurants and stronger sales growth at older shops, as well as last year's price increases.
The first quarter marked Potbelly's strongest comparable-sales showing since the company went public in October 2013. Sales at company-owned shops operating for at least 15 months, or comparable sales, rose 5.4 percent. Analysts, on average, expected comparable sales to rise 4.7 percent.
While Potbelly still anticipates sales gains this year, it signaled that the first-quarter jump would likely be its strongest showing of 2015. It expects comparable sales growth to slow later this year, particularly after it laps the price increases it took in July.
Potbelly is opening dozens of stores as the Chicago-based chain tries to get diners to visit more often and spend more on its items such as toasted sandwiches. The chain recently added avocado to the menu as a premium topping that carries a $1 charge for three slices.
Chairman and CEO Aylwin Lewis, speaking on a conference call, said he was "very pleased" with initial avocado sales and that the margins are "really strong."
Potbelly earned $531,000, or 2 cents per share, in the first quarter ended March 29, after losing $301,000, or 1 cent per share, a year earlier.
Adjusted profit jumped to $800,000, or 3 cents per share, from $200,000, or 1 cent per share. On that basis, analysts were looking for a profit of 2 cents per share. Adjusted profit excludes certain items, such as costs related to its plan to relocate its headquarters from the Merchandise Mart to 111 N. Canal within a month.
Potbelly gives broad projections but does not provide detailed quarterly forecasts. Lewis and other executives laughed off one analyst's question on how the quarter compared to the company's internal expectations.
"We thought we'd have a strong quarter, we think we're going to have a strong year," Lewis said, noting the company's growth plans and focus on execution. "We're feeling very good. But doggone it, we're not taking victory laps."
Recent results in the restaurant industry have been mixed. At the same time Potbelly released better-than-anticipated results, Noodles Company turned in a disappointing quarter and its shares fell more than 18 percent in after-hours trading.
Potbelly's first-quarter revenue rose 16.1 percent to nearly $85.8 million, topping analysts' forecast of $85.1 million.
The company still expects comparable sales at company-operated shops to rise in a low single-digit percentage range in 2015.
Potbelly opened seven company-operated shops during the quarter. It still expects to open 48 to 55 restaurants this year, including 40 to 45 company-operated locations.
Unlike many other restaurant companies with franchisees, Potbelly runs the majority of its locations. Potbelly had 339 company-operated locations and 29 franchised stores at the end of the first quarter.
Potbelly announced its results hours after another fast-casual chain, Panera Bread, became the latest company to announce it was removing certain ingredients from its food as consumers look for clean meals. Lewis said Potbelly looks to have the best ingredients and is working on reducing sodium over the next few years but did not announce any sweeping changes to the menu.
Shares of Potbelly fell 1 percent to $14.52 in Tuesday's trading, before the results were released, then erased most of those losses in after-hours trading.
jwohl@tribpub.com
