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Zoe’s Kitchen, Inc. reported first-quarter 2017 adjusted earnings per share (EPS) of 1 cent, in line with the Zacks Consensus Estimate. However, earnings fell considerably from the year-ago figure of 6 cents, given lower restaurant contribution margin.
Revenues of $90.6 million lagged the consensus mark of $92.2 million by nearly 2% but improved 12.6% year over year backed by new restaurant openings. Moving ahead, the company continues to anticipate 38 to 40 company-owned restaurant openings in the year.
However, the company’s shares declined nearly 11% in afterhours trading on May 25, mirroring investor concerns surrounding weak comps in the quarter and the company’s guidance cut for full-year 2017.
Behind the Headline Numbers
Comparable restaurant sales decreased 3.3%, given a 4.6% decrease in transactions and product mix, partially offset by a by a 1.3% price hike. Magnified traffic concerns given the challenging restaurant environment along with cannibalization in certain key markets, particularly hampered comps. Consequently, the figure compared unfavorably with the prior-quarter comps growth of 0.7% and the year-ago quarter growth of 8.1%.
Restaurant contribution margin went down 210 basis points (bps) to 19.9% due to increases in labor and store operating expenses, somewhat offset by lower cost of goods rates.
Notably, the increase in labor and store operating costs can be attributed to the dilutive effect on margins from the company’s new restaurants, which on an average, initially operate at less than system-wide average sales volumes and incur some inefficiencies for a short period of time. Additionally, wage inflation and in-store technology investments added to the woes.
2017 Guidance Cut
For the full-year 2017, the company expects total revenue in the band of $314 million to $322 million, down from the earlier guided range of $325 million to $327 million.
Also, it now projects comp sales of flat to negative 3% compared to the growth in the band of 1–2%, anticipated earlier.
Furthermore, the company predicts restaurant contribution margin in the range of 18.3% to 19% (earlier 19.0–19.3%).
We note that Zoe’s Kitchen currently has a Zacks Rank #4 (Sell).
Chipotle Mexican Grill, Inc.’s (CMG - Free Report) first-quarter 2017 adjusted earnings of $1.60 per share outpaced the Zacks Consensus Estimate of $1.28 by 25%. Earnings compared favorably with the year-ago quarter figure of a loss of 88 cents per share, given a substantial rise in revenues.
Panera Bread Company reported first-quarter adjusted earnings per share of $1.83, which fell short of the Zacks Consensus Estimate of $1.84 by 0.5%. However, earnings increased 17.3% year over year, mainly on the back of higher revenues and a lower share count.
Jack in the Box Inc.’s (JACK - Free Report) second-quarter fiscal 2017 adjusted earnings of 98 cents per share outpaced the Zacks Consensus Estimate of 90 cents by 8.9%. Further, the bottom line surged over 15.3% year over year primarily owing to lower G&A expenses.
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Zoe's Kitchen (ZOES) Q1 Earnings Meet, View Cut Hits Stock
Zoe’s Kitchen, Inc. reported first-quarter 2017 adjusted earnings per share (EPS) of 1 cent, in line with the Zacks Consensus Estimate. However, earnings fell considerably from the year-ago figure of 6 cents, given lower restaurant contribution margin.
Revenues of $90.6 million lagged the consensus mark of $92.2 million by nearly 2% but improved 12.6% year over year backed by new restaurant openings. Moving ahead, the company continues to anticipate 38 to 40 company-owned restaurant openings in the year.
However, the company’s shares declined nearly 11% in afterhours trading on May 25, mirroring investor concerns surrounding weak comps in the quarter and the company’s guidance cut for full-year 2017.
Behind the Headline Numbers
Comparable restaurant sales decreased 3.3%, given a 4.6% decrease in transactions and product mix, partially offset by a by a 1.3% price hike. Magnified traffic concerns given the challenging restaurant environment along with cannibalization in certain key markets, particularly hampered comps. Consequently, the figure compared unfavorably with the prior-quarter comps growth of 0.7% and the year-ago quarter growth of 8.1%.
Restaurant contribution margin went down 210 basis points (bps) to 19.9% due to increases in labor and store operating expenses, somewhat offset by lower cost of goods rates.
Notably, the increase in labor and store operating costs can be attributed to the dilutive effect on margins from the company’s new restaurants, which on an average, initially operate at less than system-wide average sales volumes and incur some inefficiencies for a short period of time. Additionally, wage inflation and in-store technology investments added to the woes.
2017 Guidance Cut
For the full-year 2017, the company expects total revenue in the band of $314 million to $322 million, down from the earlier guided range of $325 million to $327 million.
Also, it now projects comp sales of flat to negative 3% compared to the growth in the band of 1–2%, anticipated earlier.
Furthermore, the company predicts restaurant contribution margin in the range of 18.3% to 19% (earlier 19.0–19.3%).
We note that Zoe’s Kitchen currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zoe's Kitchen, Inc. Price, Consensus and EPS Surprise
Zoe's Kitchen, Inc. Price, Consensus and EPS Surprise | Zoe's Kitchen, Inc. Quote
Peer Releases
Chipotle Mexican Grill, Inc.’s (CMG - Free Report) first-quarter 2017 adjusted earnings of $1.60 per share outpaced the Zacks Consensus Estimate of $1.28 by 25%. Earnings compared favorably with the year-ago quarter figure of a loss of 88 cents per share, given a substantial rise in revenues.
Panera Bread Company reported first-quarter adjusted earnings per share of $1.83, which fell short of the Zacks Consensus Estimate of $1.84 by 0.5%. However, earnings increased 17.3% year over year, mainly on the back of higher revenues and a lower share count.
Jack in the Box Inc.’s (JACK - Free Report) second-quarter fiscal 2017 adjusted earnings of 98 cents per share outpaced the Zacks Consensus Estimate of 90 cents by 8.9%. Further, the bottom line surged over 15.3% year over year primarily owing to lower G&A expenses.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>