Noodles & pany(US:NDLS)2024-03-08 04:28Financial Data and Key Metrics Changes - In Q4 2023, total revenue decreased by 8.9% to $124.3 million compared to the previous year, with an estimated impact of $9.1 million from a 53rd week in Q4 2022, resulting in a 2.4% decrease when adjusted for that week [21] - System-wide comparable restaurant sales decreased by 4.2%, with company-owned restaurants down 4.3% and franchise restaurants down 3.6% [21] - The net loss for Q4 was $6.1 million, translating to a loss of $0.14 per diluted share, compared to a net income of $975,000 and earnings of $0.02 per diluted share in the previous year [23] Business Line Data and Key Metrics Changes - Company average unit volumes in Q4 were $1.31 million [21] - Restaurant-level contribution margin was 14.7%, benefiting from improvements in cost of goods sold (COGS), which was 25.4% of sales, a 150 basis point improvement from the previous year [22] - Labor costs increased to 32% of sales from 31.2% in the prior year, with wage inflation moderating to 3.9% year-over-year [22][23] Market Data and Key Metrics Changes - Approximately 54% of sales originated from digital channels, indicating a strong digital sales platform [8] - The company opened five new company-owned restaurants and closed two at lease expiration during Q4 [24] Company Strategy and Development Direction - The company aims to strengthen operational excellence, enhance brand desirability through a menu transformation, broaden the guest base via loyalty programs, develop a catering strategy, and increase financial strength by slowing new unit growth to 10-12 restaurants in 2024 [9][19][20] - The menu transformation will focus on contemporary comfort food, updating existing recipes, and adding new dishes while maintaining a noodle and pasta-based menu [12][52] Management's Comments on Operating Environment and Future Outlook - Management acknowledged recent poor performance but emphasized the need to leverage existing competitive advantages and improve operational standards [8][9] - For 2024, the company expects comparable sales to be flat to positive 3%, with a challenging first quarter due to severe weather and difficult prior year comparisons [26] Other Important Information - The company has implemented digital menu boards across all company-owned units to facilitate quicker menu changes and improve customer experience [18] - The adjusted EBITDA for Q4 was $7.5 million, down from $9.1 million in Q4 2022 due to a change in calculation methodology [24] Q&A Session Summary Question: Will there be closures in the near term? - Management expects 1% to 2% closures annually, roughly 5 to 6 units, but does not anticipate significant changes to the current footprint [30] Question: How will the company address value perception? - The company plans to implement a disciplined pricing strategy to protect unit economics while maintaining competitive pricing [33] Question: What gives confidence in sales improvement? - Management believes that operational improvements and menu initiatives will drive traffic growth, particularly in Q2 and beyond [40] Question: Is the opportunity greater in operations or menu changes? - The immediate opportunity lies in improving guest experience, particularly in underperforming locations, while menu changes will have a longer-term impact [44] Question: Will the menu expand beyond core offerings? - The company will remain focused on noodle and pasta dishes but will update recipes and add new items to enhance appeal [52] Question: What are the pricing assumptions for 2024? - The company anticipates conservative pricing in the low single digits to offset modest inflation, with a focus on maintaining margins [54]