Casual restaurant chain Noodles & Company (NASDAQ:NDLS) missed analysts' expectations in Q2 CY2024, with revenue up 1.8% year on year to $127.4 million. The company's full-year revenue guidance of $500 million at the midpoint also came in 2.7% below analysts' estimates. It made a non-GAAP loss of $0.05 per share, down from its loss of $0.02 per share in the same quarter last year.
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Noodles (NDLS) Q2 CY2024 Highlights:
- Revenue: $127.4 million vs analyst estimates of $130.7 million (2.6% miss)
- EPS (non-GAAP): -$0.05 vs analyst estimates of -$0.05
- The company dropped its revenue guidance for the full year from $517.5 million to $500 million at the midpoint, a 3.4% decrease
- Gross Margin (GAAP): 17.3%, in line with the same quarter last year
- EBITDA Margin: 7.2%, up from 5.6% in the same quarter last year
- Locations: 473 at quarter end, up from 465 in the same quarter last year
- Same-Store Sales rose 2% year on year (-5.5% in the same quarter last year)
- Market Capitalization: $73.01 million
Offering pasta, mac and cheese, pad thai, and more, Noodles & Company (NASDAQ:NDLS) is a casual restaurant chain that serves all manner of noodles from around the world.
Modern Fast Food
Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales Growth
Noodles is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's annualized revenue growth rate of 1.7% over the last five years was weak, but to its credit, it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Noodles's revenue grew 1.8% year on year to $127.4 million, falling short of Wall Street's estimates.
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Same-Store Sales
Same-store sales growth is a key performance indicator used to measure organic growth and demand for restaurants.
Noodles's demand within its existing restaurants has barely risen over the last eight quarters. On average, the company's same-store sales growth has been flat.
In the latest quarter, Noodles's same-store sales rose 2% year on year. This growth was a well-appreciated turnaround from the 5.5% year-on-year decline it posted 12 months ago, showing the business is regaining momentum.
Key Takeaways from Noodles's Q2 Results
We were impressed by how significantly Noodles blew past analysts' gross margin expectations this quarter. We were also happy its EPS narrowly outperformed Wall Street's estimates. On the other hand, its full-year revenue guidance missed analysts' expectations and its revenue missed Wall Street's estimates. Overall, this was a mixed but overall mediocre quarter for Noodles. The stock traded down 2.1% to $1.43 immediately after reporting.
Noodles may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.