Noodles & Company's Q2 Earnings Disappoint: Analyst Questions and Key Takeaways

Noodles & Company's Q2 earnings disappointed investors with revenue and profit metrics missing expectations. Management attributed the underperformance to weaker guest traffic and a misalignment between new menu pricing and consumer value perception. The company dropped its revenue guidance for the full year and saw a decline in operating margin and locations. Analysts will watch for sustained impact of value-focused menu initiatives, progress on restaurant closures, and operational improvements in menu execution and cost control.

Noodles & Company (NDLS) reported its second quarter (Q2) earnings, revealing a miss on both revenue and profit metrics, which led to a significant decline in stock price. Revenue for the quarter stood at $126.4 million, falling short of analyst expectations of $131.6 million. The adjusted earnings per share (EPS) were -$0.12, significantly below the expected -$0.06 [1]. The company also revised its full-year revenue guidance to $491 million at the midpoint, a 3.3% decrease from the previous estimate of $507.5 million [1].

Management attributed the underperformance to weaker guest traffic and a misalignment between new menu pricing and consumer value perception. CEO Andrew Madsen acknowledged that the nationwide launch of the revamped menu in March did not deliver the expected lift in guest visits, noting, “We experienced an unexpected decline in guest value perception following our menu launch in March” [1].

The company also saw a decline in operating margin, dropping to -0.9% from 0.4% in the same quarter last year, and a decrease in locations from 473 to 453 [1]. Same-store sales rose by 1.5% year on year, in line with the same quarter last year [1].

In response to the disappointing results, Noodles & Company has taken several steps to improve its performance. The company introduced the Delicious Duos value offering, which includes a small entrée and side starting at $9.95. This initiative has shown positive results, with same-store sales jumping by 5% since its launch [2]. Additionally, the company has announced plans to close up to 32 underperforming restaurants in 2025 and 12 to 17 in 2026 [2].

Analysts will be watching for the sustained impact of value-focused menu initiatives, progress on restaurant closures, and operational improvements in menu execution and cost control in upcoming quarters [1]. The company's stock currently trades at $0.70, down from $1.01 just before the earnings report [1].

References:
[1] https://finance.yahoo.com/news/noodles-q2-earnings-call-top-053113855.html
[2] https://www.nrn.com/fast-casual/noodles-company-adjusts-new-menu-in-response-to-consumer-sentiment