Potbelly(US:PBPB)2023-08-05 04:03Financial Data and Key Metrics Changes - Same-store sales grew by 12.9%, primarily driven by traffic growth [6][20] - Total revenues increased by 8.4% to $124.7 million [20] - Shop-level margins improved by 300 basis points to 14.4% [24] - Adjusted EBITDA rose to $8.0 million, a 140 basis point improvement year-over-year [24] Business Line Data and Key Metrics Changes - Digital business represented approximately 38% of total shop sales, an increase of 170 basis points year-over-year [21] - Food, beverage, and packaging costs were 28.0% of shop sales, a 50 basis point improvement [22] - Labor expenses decreased to 30.4% of sales, a 100 basis point improvement [22] Market Data and Key Metrics Changes - The company continues to take traffic share from the fast casual category on a weekly basis [6][20] - Each real estate type achieved same-store sales growth of at least high single-digit percentages [20] Company Strategy and Development Direction - The company is focused on executing a five-pillar strategic plan and expanding its franchise growth acceleration initiative [6][8] - The goal is to achieve 10% unit growth in 2024, with a target of 2,000 units in the U.S. over the next decade [15][18] - The company is enhancing its digital capabilities and expanding Potbelly Digital Kitchen installations [7][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2024 growth targets, citing strong brand value and strategic marketing efforts [17][26] - The company anticipates continued strength in same-store sales and shop-level margins [25][26] Other Important Information - The company reported net income of $2.2 million for the quarter, a $1.6 million improvement year-over-year [24] - General and administrative expenses were 9.2% of revenue, driven by higher bonus accruals and digital maintenance costs [24] Q&A Session Summary Question: What gives confidence in achieving 10% unit growth next year? - Management highlighted the number of shop commitments and the momentum built through the franchise growth acceleration initiative [28][29] Question: Why is system-wide sales a more applicable metric? - The transition to a more franchise-based organization necessitates reflecting the relationship between sales and the investment needed to support those sales [30][31] Question: How significant is the opportunity for nontraditional units? - Management sees nontraditional units as a long-term opportunity but emphasizes a focus on multiunit franchise agreements for predictable growth [32][33] Question: Clarification on the 2024 AUV target of $1.3 million - Management indicated that while current performance suggests exceeding this target, they prefer to wait for more data before solidifying the target [36][38] Question: Who are the competitors from whom Potbelly is gaining market share? - Management noted that while it's difficult to pinpoint specific chains, data indicates that Potbelly's growth is outpacing the fast casual segment [39] Question: How is the digital business performing in terms of Perks members? - Management expressed satisfaction with the growth of the Perks program, indicating that it contributes significantly to digital sales [42][43] Question: What is the composition of traffic and ticket? - Management confirmed that strong traffic growth is the primary driver of same-store sales, with a focus on customer retention and frequency [47][49]