Potbelly Q2 Revenue Beats Estimates, Stock Rises

Potbelly reported Q2 CY2025 results, beating revenue expectations with sales up 3.4% YoY to $123.7 million. Non-GAAP profit of $0.09 per share was in line with analysts' consensus estimates. The company's operating margin was 3%, in line with the same quarter last year, and free cash flow was $7.91 million, up from -$1.57 million in the same quarter last year. Locations increased to 440, up from 425 in the same quarter last year, and same-store sales rose 3.2% YoY.

Potbelly Corporation (NASDAQ: PBPB) reported robust second quarter 2025 results, with system-wide sales growth of 6.7% and company-operated same-store sales increasing by 3.2%. The company achieved total revenues of $123.7 million, up 3.4% year-over-year, and GAAP net income of $2.5 million. Key operational highlights include eight new shop openings and securing 54 additional franchise shop commitments, bringing the total open and committed shops to 816. Average Weekly Sales increased by 3.6% to $27,040, while Adjusted EBITDA grew by 13.0% to $9.6 million. The company raised its full-year 2025 guidance, projecting same-store sales growth of 2.0-3.0% and at least 38 new shops. For Q3 2025, Potbelly expects same-store sales growth of 3.25-4.25% and Adjusted EBITDA of $9.0-10.0 million [1].

The company's Q2 results demonstrate strong operational momentum with system-wide sales growing 6.7% and company-operated same-store sales increasing 3.2%. Particularly encouraging is the positive traffic growth, a crucial metric in the restaurant industry that shows Potbelly is attracting more customers rather than just raising prices. The company's Average Weekly Sales (AWS) increased by 3.6% to $27,040, indicating improved productivity per location. While total revenues grew more modestly at 3.4% to $123.7 million, the company achieved a more substantial 13% increase in Adjusted EBITDA to $9.6 million, demonstrating stronger operational efficiency and cost management. The apparent decline in GAAP net income (from $34.7 million to $2.5 million) is misleading because the prior year included a $31.3 million one-time tax benefit. The more relevant comparison is adjusted net income, which increased from $2.5 million to $2.9 million, showing genuine profit growth [1].

Potbelly's unit expansion strategy is gaining traction with eight new shops opened in Q2 and 54 additional franchise commitments secured. This acceleration in franchise growth is crucial for a smaller chain looking to scale efficiently while minimizing capital requirements. Management's decision to raise full-year guidance signals confidence in continued performance improvements. The new guidance projects same-store sales growth of 2-3% for 2025 and adjusted EBITDA of $34-35 million. For Q3 specifically, the company expects stronger same-store sales growth of 3.25-4.25% [1].

The share repurchase program reflects management's confidence in Potbelly's valuation and future prospects. With $16.5 million still available under the repurchase authorization, the company maintains flexibility to return capital to shareholders while continuing to invest in growth initiatives. Overall, Potbelly appears to be successfully executing its "Five-Pillar Operating Strategy" focused on menu innovation, digital investments, unit growth, and cost controls. The positive traffic trends and unit expansion momentum suggest the brand remains relevant and has significant growth runway ahead [1].

References:
[1] https://www.stocktitan.net/news/PBPB/potbelly-corporation-reports-results-for-second-fiscal-quarter-yij3jpdenxbo.html