Potbelly Corp (NASDAQ:PBPB) recently announced earnings and beat estimates across the board.The company showed a profit of 6 cents per share and $84.8 million in revenue. Year over year bottom line was flat as operating expenses rose but they still beat analysts’ expectations. The company beat the EPS number by 50%. Sandwich shop sales were strong along with franchising royalties. Same store sales for shops owned by the company rose 3.7% and were bolstered by stronger foot traffic.
Cost Of Goods
Cost of goods sold rose slightly to 29.9% which is up about 10BPS from the previous year. Wholesale dairy and protein prices affected costs and were responsible for the rise. Labor and labor related expenses were also up ending at 28.9% for the period. That’s 30 BPS higher than the same period last year also. Occupancy expenses lowered and came in at 12.7%. Potbelly Corp (NASDAQ:PBPB) also projected the coming year’s earnings to grow at about 22%.
Franchises are the most cost effective as the company collects royalties without absorbing the day-to-day costs associated with individual units. Corporate-owned units allow Potbelly Corp (NASDAQ:PBPB) to keep revenues without sharing but they also are responsible for the rent and all over head expenses.
Potbelly Corp (NASDAQ:PBPB) opened 19 new shops during the period and that included 16 that will be company operated and 3 franchised operations. The fast-casual operator recently revamped its menu in an effort to drive more traffic to shops. Like most restaurant operators, it is battling rising food prices and labor concerns. New insurance regulations also are playing a part in Potbelly Corp (NASDAQ:PBPB)’s balance sheet as it strives to meet regulations for the Affordable Care Act.
The stock is in a very bullish cup and handles formation and is at the moment of truth. The handle islong and if the stock is going to break up off it that needs to happen soon. Otherwise more sideways base-building is in store. Should it fail here and break down there is support at $13.