Potbelly Corporation Experiences Steady Growth in Q2 2024

Potbelly Corporation, a well-known sandwich brand, has reported a slight rise in same-store sales and improved margins during the second quarter of 2024, despite facing a tough macroeconomic landscape.

The company’s digital initiatives, including the Perks loyalty program, played a crucial role in driving sales, contributing around 40% to total shop sales. With a focus on delivering customer value and successfully expanding its franchise model, Potbelly is poised for growth, planning to open a minimum of 30 new locations in 2024, while also being optimistic about its 2025 expansion plans.

### Key Highlights

– Potbelly Corporation recorded a 0.4% increase in same-store sales for Q2 2024.
– Shop margins have improved for 13 consecutive quarters.
– The company opened 4 new locations this quarter, with at least 30 more planned for 2024.
– Digital channels, especially the Perks loyalty program, are significantly contributing to growth.
– Franchise growth is expanding, with a total of 663 shops currently open or committed, and 54 new franchise commitments in 2024.
– Q2 revenues reached $119.7 million, with a net income of $34.7 million, elevated by the release of a tax valuation allowance.
– The introduction of a new store prototype measuring 1,800 square feet has been well-received and offers cost efficiency.

### Company Outlook

– Potbelly is optimistic about its brand’s future and its mission to become the most loved sandwich brand nationwide.
– The company is closely monitoring its 2025 opening plans and anticipates ongoing growth through 2024 and 2025.
– Adjusted EBITDA for Q2 was $8.5 million.

### Bearish Signals

– A slower start to Q3 has been observed, attributed to the timing of the Fourth of July holiday and adverse weather conditions due to Hurricane Beryl.
– A potential price adjustment is being evaluated for Q3 based on market dynamics.
– Customer traffic has declined, which may impact Q3 sales.

### Bullish Indicators

– New locations for 2024 are exceeding sales projections and outperforming the system average.
– The Perks rewards program is positively influencing customer frequency and purchasing behavior.
– A potential for double-digit unit growth is expected in 2025.

### Adjustments and Guidance

– The full-year guidance for same-store sales has been revised to a range from -1.5% to +0.5%.

### Q&A Insights

– The impact of the rewards program on customer purchasing habits was discussed, showcasing improvements in customer satisfaction scores.
– Strategies to enhance labor efficiencies have yielded a 240 basis point reduction in labor costs compared to the previous year.
– Satisfaction with both digital and in-store orders continues to develop positively.

Overall, Potbelly Corporation is navigating economic challenges while focusing on strategic initiatives to drive growth and efficiency across its operations. Despite some pressures, the brand’s performance in digital sales and franchise expansion provides a strong foundation for its future potential.