Noodles & Company ((NDLS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Noodles & Company recently held its earnings call, revealing a mixed sentiment. The company showcased strong performance in comparable sales growth and strategic initiatives, such as the Delicious Duos platform and digital sales improvements. However, challenges persist, including a slight decrease in total revenue and a net loss impacted by restaurant closures.
Comparable Sales Growth
In the third quarter, Noodles & Company reported a 4% growth in comparable sales, with an impressive acceleration to 8% in October, surpassing the industry average. This growth highlights the company’s successful strategies in enhancing customer experience and increasing market share.
Digital Sales and NoodlesREWARDS Program
Digital sales saw a notable increase of 12%, driven by third-party delivery services. The NoodlesREWARDS program also experienced growth in enrollment, supported by targeted promotions, indicating a strong digital engagement strategy.
Introduction of Delicious Duos Platform
The Delicious Duos platform, launched in late July, has been well-received, contributing 4% to 5% of sales. It is now considered a regular menu option, showcasing its success in appealing to customers and boosting sales.
Improved Restaurant Contribution Margins
Restaurant contribution margins improved by 40 basis points, with adjusted EBITDA increasing by 33%. This improvement is attributed to enhanced sales and effective cost controls, reflecting the company’s operational efficiency.
Strategic Restaurant Closures
The company strategically closed underperforming restaurants, expecting to improve 2026 restaurant-level contribution by over $2 million. This move aims to streamline operations and focus on more profitable locations.
Total Revenue Decline
Despite positive sales growth, total revenue decreased by 0.5% compared to last year, resulting in a net loss of $9.2 million in the third quarter. This decline underscores the challenges the company faces in maintaining overall revenue growth.
Impact of Restaurant Closures on Net Loss
The net loss for the third quarter included a $5.3 million non-cash impairment charge related to the closure of underperforming restaurants. This charge significantly impacted the company’s financial results for the period.
Slight Decrease in Company Comp Traffic
Company comp traffic decreased slightly by 0.6% during the third quarter. However, there was a positive trend in the second half of the quarter, indicating potential recovery in customer visits.
Forward-Looking Guidance
Looking ahead, Noodles & Company provided an optimistic outlook for 2025. The company expects total revenue between $492 million and $495 million, with comparable restaurant sales growth of 3.6% to 4.2%. Capital expenditures are projected to be between $12 million and $13 million, reflecting continued investment in growth initiatives.
In summary, Noodles & Company’s earnings call highlighted a blend of positive growth in key areas and challenges that need addressing. The strong performance in comparable sales and digital engagement, coupled with strategic initiatives like the Delicious Duos platform, positions the company for future growth. However, the slight revenue decline and net loss due to restaurant closures remain areas of concern. The forward-looking guidance suggests a positive trajectory, with expectations of continued growth and strategic investments.