Why Noodles & Co. Is Still Down

Last year when Noodles & Co. (NASDAQ: NDLS  ) hit the stock market, it jumped up to around $45 right out of the gates, up from an IPO price of $18. Through October, the stock bumped along at $45 as investors waited for the company to release its third-quarter results in early November. That didn't go so well. The stock is now trading at $36. What comes next? Can Noodles & Co. get back on top?

Plans for 2014
Yesterday, Noodles & Co. presented at the ICR XChange conference, where it laid out its plans for 2014 and beyond. The most important prediction that the brand spoke about was the size of the U.S. potential for its stores. According to Noodles & Co., the U.S. can sustain more than 2,500 locations; right now, it operates 368 stores. For some comparison, Chipotle (NYSE: CMG  ) currently operates a little more than 1,500 restaurants.

Noodles & Co. also said that it was planning on growing its total units by 12% to 13% every year. So look for the 2,500th store to open up sometime during 2029. Good year.

Looking to the shorter term, Noodles & Co. is hoping to lay the foundation for the long road ahead. For the fourth quarter, that means growing comparable sales at 3.9% over last year. Chipotle grew its third-quarter comparable sales by 6.2%.

To get a bit more traction, Noodles & Co. is planning to expand its dinner options by adding more locations that have full dessert, coffee, and tea offerings. Right now, just over 50 locations have the full dinner setup. The company is also hoping to expand its catering business -- that's a move that's been successful for competitors like Panera (NASDAQ: PNRA  ) .

Noodles & Co. for the long haul
The biggest challenge for Noodles & Co. is that it's not growing individual locations at the same rate that fast-casual competitors have managed. While lagging behind Chipotle, Noodles & Co. isn't having trouble keeping up with Panera. The sandwich-cafe chain only managed a 1.3% increase in comparable sales in its last reported quarter.

The problem is at the macro level, where the decline of pasta consumption in the U.S. is evident. American spending on pasta is now growing at less than 2% per year, according to analysts. While the Atkins fad has come and gone, the lingering decrease in pasta consumption has left its mark on the American food landscape.

In order to move beyond the carb stigma, Noodles & Co. needs to find a way to focus on its other options. Salads and Asian dishes, which often avoid the carb branding, may offer Noodles & Co. another path to success. For now, the company is still struggling to figure out where it fits in the fast-casual landscape, and for investors, that may mean another year of flagging sales and mediocre returns.

Better business for 2014
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our special report "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 16, 2014, at 11:28 AM, denquixote wrote:

    I love everything about the restaurant except their inability to keep the serving warm while you are eating. Nothing is more annoying than receiving a hot meal on a cold plate. It may work in the summer but I live in the Northeast and it's not working right now.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2795759, ~/Articles/ArticleHandler.aspx, 9/16/2014 7:49:00 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement