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.
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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