Sluggish Potbelly May Serve Up Self -- WSJ
August 05 2017 - 3:02AM
Dow Jones News
By Julie Jargon and Austen Hufford
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 5, 2017).
Sandwich maker Potbelly Corp. is considering putting itself up
for sale, making it the latest restaurant chain to run into trouble
as Americans dine out less.
Potbelly on Friday reported a steep decline in earnings and
same-store sales in the second quarter, and said it would undertake
a comprehensive review of its business.
"The overall restaurant operating environment remains
challenging and we do not contemplate an improvement in industry
trends in our outlook for 2017," said Mike Coyne, the Chicago-based
company's finance chief and interim chief executive.
In June, Ancora Advisors LLC, which holds a 4% stake in the
company, sent a letter the board, calling for a change in strategy
or a sale, citing Potbelly's declining share price. Potbelly shares
fell 0.2% to $10.88 in Friday trading and are down 16% so far this
year.
Restaurant chains from Starbucks Corp. to Shake Shack Inc. have
reported slowing or falling traffic in recent quarters, as changing
consumer behaviors catch up with them. Consumers are increasingly
eating at home or the office to save money and time, particularly
at lunch. People are also shopping more online, and making fewer
trips to restaurants near malls.
McDonald's Corp. is one of the few restaurant chains that had a
strong second quarter. The burger giant said a $1 drinks promotion
had helped attract more customers.
Potbelly said nearly 60% of its business comes at lunch, and
that it is looking at ways to attract more customers at other
times. Potbelly competes in a crowded market. Numerous sandwich
chains have opened and expanded in recent years, including Jersey
Mike's, Firehouse Subs and Jimmy John's.
Potbelly, which went public in 2013, has retained J.P. Morgan
Securities as its financial adviser. The business review will
include everything from its advertising strategy to ways to
accelerate franchising, Potbelly said. About 11% of the company's
restaurants are franchise locations, but the company has said it
wants to boost that number to 25%.
Same-store sales at company-operated outlets fell 4.9% in the
second quarter. Potbelly posted a quarterly loss of 1 cent a share,
compared with earnings of 13 cents per share a year ago. Total
revenue rose 3% to $108.1 million in the quarter.
For the year, the company now expects comparable sales to fall
in the mid-single digits, compared with prior guidance of a
low-single-digit decline.
Potbelly got its start in 1977 in Chicago as an antique store,
but it eventually became known for its sandwiches, which it added
to boost sales. Potbelly opened its second shop in 1997, its 100th
site in 2005, and reached the 300 mark in 2013. As of June 25, the
company had 424 owned stores and 54 franchised locations.
Write to Julie Jargon at julie.jargon@wsj.com and Austen Hufford
at austen.hufford@wsj.com
(END) Dow Jones Newswires
August 05, 2017 02:47 ET (06:47 GMT)
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