Noodles & Company ((NDLS)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Noodles & Company presented a mixed bag of outcomes, reflecting both positive strides and significant challenges. On the upside, the company reported growth in same-store sales and improvements in digital engagement. However, these were counterbalanced by a decline in overall revenue, increased operational costs, and a notable net loss. Operational adjustments and the introduction of the Delicious Duos platform have shown potential in enhancing sales trends, yet the financial outlook remains cautious with revised guidance.
Positive Same-Store Sales Growth
Noodles & Company reported a modest increase in same-store sales, with a 1.5% rise overall. This growth was consistent across both company-owned and franchise restaurants, which saw increases of 1.5% and 1.6%, respectively. This positive trend indicates a stable consumer base and effective sales strategies.
Improvement in Recent Sales Trends
The launch of the Delicious Duos value platform has positively impacted sales trends, with same-store sales improving to an average of 5% over the past two weeks. This initiative appears to be resonating well with customers, driving short-term sales growth.
Successful Digital Engagement
The company’s digital platforms have seen increased engagement, with traffic on owned web and app platforms rising by 2% year-over-year. Additionally, rewards member check-ins have grown by 4% year-over-year, highlighting successful digital marketing and customer retention efforts.
Operational Adjustments and Efficiency
To address rising costs and enhance guest satisfaction, Noodles & Company has made several operational adjustments. These include eliminating the Green Goddess salad and refining recipes, which have contributed to reduced food costs and improved operational efficiency.
Revenue Decline
Despite positive sales trends, total revenue for the quarter decreased by 0.7% compared to last year, amounting to $126.4 million. This decline underscores the challenges the company faces in maintaining growth amidst a competitive market.
Decreased Traffic and Increased Costs
The company experienced a 2.5% decrease in comp traffic, coupled with increased costs due to higher food and labor expenses associated with the new menu rollout. These factors have put pressure on the company’s profitability.
Net Loss and Profitability Challenges
Noodles & Company reported a net loss of $17.6 million for the second quarter, a significant increase from the $13.6 million loss recorded last year. Adjusted EBITDA also fell to $6 million from $9.2 million, highlighting ongoing profitability challenges.
Restaurant Closures and Impairment Charges
The company anticipates closing 28 to 32 company-owned restaurants in 2025, with impairment charges further affecting financial performance. These closures are part of a strategic effort to streamline operations and focus on more profitable locations.
Revised Full Year Guidance
Noodles & Company revised its full-year 2025 guidance to reflect recent trends, projecting total revenue between $487 million and $495 million. Comparable restaurant sales growth is expected to be between 2.5% and 4%. Despite these projections, the company does not expect to be free cash flow positive in 2025 but aims for this achievement in 2026.
In conclusion, the earnings call for Noodles & Company highlighted a mix of positive developments and significant challenges. While there are promising signs in sales growth and digital engagement, the company faces hurdles with declining revenue, increased costs, and profitability issues. The revised guidance underscores a cautious outlook, with strategic adjustments aimed at achieving long-term financial stability.