The Exchange

Noodles & Co., Panera Bread sink after earnings

The Exchange
This undated image provided by Noodles & Company, shows the company's logo. Shares of Noodles & Co. are soaring Friday, June 28, 2013, in their first day of trading on the Nasdaq. The casual restaurant chain raised $96.5 million in its initial public offering of stock. Shares priced at $18 each, above the $15 to $17 it predicted earlier this week. (AP Photo/Noodles & Company)
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This undated image provided by Noodles & Company, shows the company's logo.

Two fast-casual restaurant operators, Panera Bread (PNRA) and Noodles & Co. (NDLS), were dropping Wednesday after earnings disappointments from both prompted traders to start selling.

Of the pair, Noodles was having the worst session, slumping 11% to $33.79. If that holds, it would be the largest single-day decline in the short public history of the Broomfield, Colo., pasta shop that goes back only to late June.

Driving this were the quarterly results. First-quarter earnings of 5 cents a share met expectations, but revenue of $89.5 million, though up $8 million from the year-ago quarter, fell short of the consensus projection of $92.2 million. Same-store sales for the entire system were down 1.6%.

Echoing a common complaint, Noodles said winter storms contributed to weak traffic, and a 2.2% menu price increase wasn't enough to make up for the lack of visitors to its stores. Regardless, the company generally maintained its prior full-year goals, including around 25% adjusted EPS growth, "provided we have a strong second half to the year."

Being small and at the same time new to the market doesn't allow for misses, especially when your stock has one of the highest forward multiples in the restaurant segment, at 62.2. And weather impacts, despite the frequency of mentions by corporate executives, don't produce much sympathy, in particular when other "growth" names like Buffalo Wild Wings (BWLD) are seeing improvements amid a stormy season.

Meanwhile, Panera had another decrease in transactions at its company-owned stores, saying that even after adjusting for the effects of weather and the Easter weekend, total checkouts fell at least 1.3% in the first quarter. It also indicated second-quarter earnings probably will be below Wall Street's forecast, and it reduced the high end of its 2014 guidance.

Investors didn't want to hear about the rationale for unpleasant results, sending the stock down 5.6% to $154.

St. Louis-based Panera said it earned $1.55 a share in the quarter, on revenue of $605.3 million, both of which exceeded estimates. Same-store sales were up 0.1% on the strength of a 2.9% climb in average check sizes at company-operated locations.

However, in the second quarter, Panera believes earnings will be $1.70 to $1.76 a share, under the $1.83 consensus. Full-year earnings should be $6.80 to $7, compared with the prior view of $6.80 to $7.05. Panera does still plan to open 115 to 125 new stores this year.

From its peak at $51.97 in the days after its IPO, Noodles has lost almost 35%. Panera is nearly 21% below its all-time high of $194.77, achieved last May. Restaurant stocks overall rose more than 50% last year, easily outpacing the S&P 500, but this year the industry's gains have been muted, as has the broad market.

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