Potbelly (PBPB) Beats Q4 Earnings & Revenues; Shares Up - Analyst Blog

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Potbelly Corporation ( PBPB ) recently posted fourth-quarter 2014 results with earnings and revenues surpassing the respective Zacks Consensus Estimate. Following the results, shares of the restaurateur rose approximately 10% in aftermarket trading.

Potbelly's adjusted earnings of 6 cents per share beat the Zacks Consensus Estimate of 4 cents by 50%, possibly due to higher revenues. However, it was flat year over year, as an increase in revenues was offset by expenses.

Total revenue of $84.8 million beat the Zacks Consensus Estimate of $83 million by 2.2% and went up 13.4% year over year, on the back of higher revenues at sandwich shop sales, net and franchise royalties and fees.

Behind the Headline Numbers

Company-operated comparable store sales increased 3.7% backed by an improvement in traffic. The rise, compared favorably with 0.5% growth in the last quarter as well as 0.7% improvement in the year-ago quarter.

Cost of goods sold, as a percentage of sales, increased to 29.2%, up 10 basis points (bps) from the prior year, mostly due to price rises for dairy and certain proteins items. Labor and related expenses, as a percent of revenues, were 28.9%, up 30 bps owing to higher labor expenses as a result of outlet openings. Occupancy expenses, as a percent of revenues, were 12.7%, down 10 bps.

Store Update

Potbelly opened 19 shops, including 16 company-operated shops and 3 franchised outlets in the quarter.

Full-year 2014 Results

For 2014, earnings were 22 cents, down 35% year over year. Total revenue increased 9.1% from 2013 to $327.0 million.

Guidance for 2015

For 2015, the company expects annual adjusted net income to increase around 20% year over year. Comps are expected to grow in the range of low single-digits in 2015.

The company expects cost of goods sold, as a percentage of sales, to be in the range of 29% to 30% for 2015 due to inflated commodity prices. For the full year 2015, labor costs as a percentage of sales is expected to range between 28% and 29%, due to staff training related expenses and employee bonuses.

Potbelly expects to open a total of 48-55 restaurants, including 40-45 company-operated units in 2015.

The company presently has a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the restaurant industry include Ignite Restaurant Group, Inc. ( IRG ), Dave & Buster's Entertainment, Inc. ( PLAY ) and Papa Murphy's Holdings, Inc. ( FRSH ). All these stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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