Zoe's Kitchen (ZOES) Down on Wider-Than-Expected Loss in Q1

Shares of Zoe's Kitchen, Inc. ZOES decreased 23.6% in after-hours trading on May 24, after the company reported weaker-than-expected first-quarter 2018 numbers. So far this year, the stock has declined 13.4% compared with the 1% fall of the industry it belongs to. Moreover, the company trimmed its guidance for 2018.

In the quarter under review, Zoe's Kitchen posted adjusted loss per share of 13 cents, wider than the Zacks Consensus Estimate of a loss of 2 cents. In the first quarter of 2017, the company had reported adjusted earnings per share of 1 cent. Results were mainly impacted by decline in dine-in traffic as well as weather and calendar shift.

Revenues came in at $102.1 million, which lagged the consensus mark of $105 million by 2.8%. However, the top-line figure improved 12.7% year over year backed by restaurant openings.

Furthermore, Zoe’s Kitchen opened 11 company-owned restaurants in the first quarter and expects to open 25 in 2018.

Factors Behind the Numbers

Comparable restaurant sales were down 2.3%, comprising a 4.4% decline in transactions and product mix, offset by a 2.1% rise in price. In the prior-year quarter, Zoe's Kitchen had reported comps decline of 3.3%, comparing unfavorably with the preceding quarter’s 0.3%   growth.

Restaurant contribution margin contracted 370 basis points (bps) year over year to 16.2%. The decline can be attributed to increased labor and operating expenses, which has offset the improvement in cost of goods.

Zoe's Kitchen, Inc. Price, Consensus and EPS Surprise

Zoe's Kitchen, Inc. Price, Consensus and EPS Surprise | Zoe's Kitchen, Inc. Quote

Balance Sheet

As of Apr 16, 2018, cash and cash equivalents amounted to $3.7 million compared with $2.3 million as of Dec 25, 2017.

Total debt at the end of quarter totaled $47.6 million, up from $45.8 million at the end of Dec 25, 2017.

Trims FY18 Outlook

Following weaker-than-expected results in first-quarter 2018, the company trimmed its outlook for 2018. Zoe's Kitchen now expects total revenues between $345 million and $352 million, down from the prior guided range of $358 million and $368 million.

Comparable restaurant sales are projected between -2% and -4% compared with the earlier guidance of flat to up 2%.

Further, the company predicts restaurant contribution margin in the band of 16-17%, down from 17.3-18.4%.

Peer Releases

Darden DRI reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but sales lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of increased sales. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Restaurant Brands’ QSR first-quarter 2018 earnings and sales outpaced the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, improving 86.1% year over year. The company has a Zacks Rank #3 (Hold).

Chipotle’s CMG first-quarter 2018 earnings surpassed analysts’ expectations, while sales came in line with the same. The Zacks Rank #3 company’s adjusted earnings of $2.13 per share surged 33.1% from the year-ago quarter, courtesy of improved sales and lower food costs.

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