Potbelly Corp’s Earnings Call Highlights Strong Growth

Potbelly Corporation ((PBPB)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Potbelly Corporation reflected a largely positive sentiment, driven by strong sales growth, digital expansion, and franchise development. Despite some concerns about expense management and a slight mix decline, the overall outlook remains optimistic, bolstered by increased financial guidance.

Sales Growth and Shop Openings

Potbelly Corporation reported a 3.2% growth in same-store sales, accompanied by positive traffic trends. The company opened 8 new shops during the quarter, surpassing their initial expectation of 6. Looking ahead, Potbelly plans to open at least another 8 shops in the third quarter, demonstrating their commitment to expansion.

Adjusted EBITDA Performance

The company achieved an adjusted EBITDA of $9.6 million, reaching the high end of their guidance range. This represents a 13% year-over-year growth, indicating strong financial performance and effective cost management.

Digital Sales Increase

Digital sales have become a significant component of Potbelly’s revenue, accounting for over 41% of total shop sales. This marks an increase of approximately 140 basis points compared to the previous year, highlighting the success of their digital strategy.

Franchise Growth Acceleration

Potbelly experienced its strongest quarter ever in terms of franchise growth, adding 54 new franchise shop commitments. This brings the total open and committed shop count to 816, underscoring the company’s robust franchise development efforts.

Financial Guidance Increase

Potbelly has raised its full-year 2025 guidance, now anticipating same-store sales growth of 2.0% to 3.0%, unit growth of at least 38 openings, and adjusted EBITDA of approximately $34.0 million to $35.0 million. This upward revision reflects confidence in their strategic initiatives and market position.

Mix Decline

The company reported a slight mix decline of 0.6%, as the average check increase did not fully cover the gross price increase of 2.7%. This indicates a need for careful pricing strategy adjustments moving forward.

Labor and Operating Expenses

Labor expenses remained flat year-over-year at 28% of sales, while other operating expenses held steady at 18.4% of sales. This stability suggests effective cost control measures in these areas.

General and Administrative Expenses

General and administrative expenses rose to 8.7% of system-wide sales, an increase of 50 basis points year-over-year. This was primarily due to payroll costs and nonrecurring consulting and legal settlement costs.

Forward-Looking Guidance

Potbelly’s forward-looking guidance for the full year includes a projection of same-store sales growth between 2.0% and 3.0%, with unit growth of at least 38 openings. The adjusted EBITDA is expected to be approximately $34.0 million to $35.0 million, up from the previous range. For the third quarter, the company anticipates same-store sales growth of 3.25% to 4.25% and adjusted EBITDA of $9.0 million to $10.0 million. These projections highlight Potbelly’s strategic focus on menu innovation, digital enhancements, and shop expansion.

In conclusion, Potbelly Corporation’s earnings call conveyed a positive sentiment, driven by strong sales growth, digital expansion, and franchise development. While there are areas of concern, such as expense management and mix decline, the company’s increased financial guidance and strategic focus on growth initiatives provide a promising outlook for the future.