Shares of Zoe’s Kitchen, Inc. fell more than 10% in after-hours trading on Feb 23, after the company reported lower-than-expected fourth-quarter 2016 results.
Earnings and Revenue Discussion
Zoe's Kitchen’s adjusted loss of 7 cents per share was wider than the Zacks Consensus Estimate of a loss of 6 cents by 16.7%. Also, the loss was significantly wider than the prior-year quarter loss of 3 cents, given lower restaurant contribution margin.
Revenues of $62 million slightly lagged the consensus mark of $62.3 million by 0.5% but improved 17.6% year over year backed by comps increase and new restaurant openings.
Behind the Headline Numbers
Comparable restaurant sales increased 0.7% driven by a 3.1% price hike, partially offset by a 2.4% decrease in transactions and product mix. However, the figure compared unfavorably with the prior-quarter comps growth of 2.4% and the year-ago quarter growth of 7.7%.
Restaurant contribution margin went down 320 basis points (bps) to 16.6% due to increases in labor and store operating expenses. In fact, 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. This was in addition to wage inflation and in-store technology investments.
2016 Results
During 2016, adjusted earnings of 8 cents per share missed the Zacks Consensus Estimate of 9 cents by 11.1% and were lower than the year-ago earnings of 10 cents by 20%.
Revenues of $276 million marginally missed the consensus mark by 0.1% and increased almost 22% year over year.
In 2016, Zoe’s Kitchen opened 38 new company-owned restaurants compared to just four new restaurant openings last year. As of Dec 26, 2016, there were 201 company-owned restaurants and three franchised outlets.
Zoe's Kitchen, Inc. Price, Consensus and EPS Surprise
2017 Guidance
For the full-year 2017, the company expects total revenue in the range of $325 million to $327 million. Comp sales are also anticipated to grow in the band of 1-2%.
Further, the company predicts restaurant contribution margin in the range of 19.0–19.3%.
The company also projects general and administrative (G&A) expense margin to be approximately in the range of 10.7-10.8%. This is inclusive of $3.1 million of non-cash equity based compensation expense.
Additionally, 38 to 40 company-owned restaurant openings are expected in the year.
Zacks Rank & Stocks to Consider
Zoe's Kitchen has a Zacks Rank #4 (Sell). Better-ranked stocks in this sector include:
Potbelly Corporation (PBPB - Free Report) sports a Zacks Rank #1 (Strong Buy). Its long-term growth estimate stands at 20% compared with the industry average of 15.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dave & Buster’s Entertainment, Inc. (PLAY - Free Report) is a Zacks Rank #2 (Buy) company. It has a positive record of earnings surprises, recording an average beat of 37.81% in the last four quarters.
Wingstop, Inc.’s (WING - Free Report) 2016 earnings growth estimate is pegged at 21.3% compared with the industry average of 7.3%. It currently carries a Zacks Rank #2.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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Shares of Zoe’s Kitchen, Inc. fell more than 10% in after-hours trading on Feb 23, after the company reported lower-than-expected fourth-quarter 2016 results.
Earnings and Revenue Discussion
Zoe's Kitchen’s adjusted loss of 7 cents per share was wider than the Zacks Consensus Estimate of a loss of 6 cents by 16.7%. Also, the loss was significantly wider than the prior-year quarter loss of 3 cents, given lower restaurant contribution margin.
Revenues of $62 million slightly lagged the consensus mark of $62.3 million by 0.5% but improved 17.6% year over year backed by comps increase and new restaurant openings.
Behind the Headline Numbers
Comparable restaurant sales increased 0.7% driven by a 3.1% price hike, partially offset by a 2.4% decrease in transactions and product mix. However, the figure compared unfavorably with the prior-quarter comps growth of 2.4% and the year-ago quarter growth of 7.7%.
Restaurant contribution margin went down 320 basis points (bps) to 16.6% due to increases in labor and store operating expenses. In fact, 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. This was in addition to wage inflation and in-store technology investments.
2016 Results
During 2016, adjusted earnings of 8 cents per share missed the Zacks Consensus Estimate of 9 cents by 11.1% and were lower than the year-ago earnings of 10 cents by 20%.
Revenues of $276 million marginally missed the consensus mark by 0.1% and increased almost 22% year over year.
In 2016, Zoe’s Kitchen opened 38 new company-owned restaurants compared to just four new restaurant openings last year. As of Dec 26, 2016, there were 201 company-owned restaurants and three franchised outlets.
Zoe's Kitchen, Inc. Price, Consensus and EPS Surprise
2017 Guidance
For the full-year 2017, the company expects total revenue in the range of $325 million to $327 million. Comp sales are also anticipated to grow in the band of 1-2%.
Further, the company predicts restaurant contribution margin in the range of 19.0–19.3%.
The company also projects general and administrative (G&A) expense margin to be approximately in the range of 10.7-10.8%. This is inclusive of $3.1 million of non-cash equity based compensation expense.
Additionally, 38 to 40 company-owned restaurant openings are expected in the year.
Zacks Rank & Stocks to Consider
Zoe's Kitchen has a Zacks Rank #4 (Sell). Better-ranked stocks in this sector include:
Potbelly Corporation (PBPB - Free Report) sports a Zacks Rank #1 (Strong Buy). Its long-term growth estimate stands at 20% compared with the industry average of 15.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dave & Buster’s Entertainment, Inc. (PLAY - Free Report) is a Zacks Rank #2 (Buy) company. It has a positive record of earnings surprises, recording an average beat of 37.81% in the last four quarters.
Wingstop, Inc.’s (WING - Free Report) 2016 earnings growth estimate is pegged at 21.3% compared with the industry average of 7.3%. It currently carries a Zacks Rank #2.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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