Zoe's Kitchen rallies as sales set to beat expectations

Chris Nichols
August 11, 2014

Zoe's Kitchen (ZOES) added another positive financial development Monday, saying its sales results for the fiscal second quarter probably would surpass Wall Street's estimates.

Shares rose following the news, recently by 2.8% to $30.40. Earlier in the session, the stock was as high as $31.50, equal to a 6.5% gain from Friday's close.

Zoe's is one of the newly public restaurant chains that's been discussed as potentially "the next Chipotle," meaning it's a fast-casual store that promises higher-quality ingredients, at a price above fast-food operators. Plano, Texas-based Zoe's had its IPO in April, and from its first trade at $25.65, the stock is up 18.5% at its current level. However, that's well below its all-time high of $35.59.

The latest gain was prompted by the company saying quarterly revenue was between $41.6 million and $41.8 million, with same-store sales rising 7.3% to 7.5%. Analysts are expecting revenue of $40.5 million and a comparable-sales increase of 5.8%, according to FactSet. The final results will be released around Aug. 28.

If those ranges hold, it will be the second quarter in which Zoe's outpaced views. First-quarter sales were better than the forecast, and Zoe's lost less money than expected.

The second-quarter numbers offset a separate announcement that as many as an additional 4.6 million Zoe's shares soon would be on the market. Stockholders are offering nearly the entire amount, though the company itself is selling up to 94,100 shares. Zoe's will use the proceeds from its sale to buy back shares from corporate officers. Sales such as this are common after public offerings, but an issue of new shares dilutes the value for remaining investors and can have a dampening effect on trading prices, as it increases the stock's available supply.

Analysts have a $32.80 consensus price on the stock, about 7.9% above its last trade.