Potbelly Sandwich Works mulls sale – Consumer News

on Aug5

4 August 2017 | 7:00 pm

CORRECTED

Potbelly has hired J.P. Morgan Securities and is considering a sale in the face of a saturated restaurant market with sluggish sales.

The Chicago-based sandwich maker today reported second-quarter earnings that missed expectations. The company is “undertaking a comprehensive review of our business strategy,” interim CEO Michael Coyne said in a statement.

Coyne said Potbelly tapped J.P. Morgan Securities “as our financial advisor to assist with this review and development of strategic business alternatives. Potbelly remains open to all strategic options that would potentially significantly enhance shareholder value over the long-term.”

Potbelly swung to a loss of $138,000 from net income of $3.4 million in the same period last year. Revenue was up to $108.1 million, from $105.0 million a year ago, but below analysts’ estimates. Potbelly expects a mid-single-digit decline in company-operated same-store sales for 2017.

Potbelly’s struggles are myriad. In May, the company announced that longtime chief Aylwin Lewis would step down; Michael Coyne, previously its CFO, was tapped as interim CEO last month.

Lewis had led Potbelly for nine years, guiding it through an initial public offering and expanding the chain to 464 stores in the U.S., Canada, Britain and the Middle East.

A bigger problem is that people aren’t eating out as frequently, instead opting for budget-friendly and healthier home cooking. That’s a major problem for the saturated fast-casual market.

Before he departed, Lewis blamed this shift in customer habits for slumping customer traffic at Potbelly. “The operating environment remains highly challenging for restaurants, and our business performance in the first quarter was reflective of the negative traffic trends experienced throughout most of the industry,” Lewis told analysts on a first-quarter earnings call in early May.

Potbelly wouldn’t be the only homegrown sandwich shop to sell. Last September, Jimmy John founder Jimmy John Liautaud sold a majority stake of his Champaign-based chain to Atlanta private-equity firm Roark Capital Group.

This story has been corrected to show that Potbelly swung to a loss of $138,000, not $138 million.



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