Zoe's Kitchen Inc Earnings Surge as Revenue Leaps 27%

Image source: Zoe's Kitchen.

Zoe's Kitchen (ZOES) reported first quarter results on May 31. The Mediterranean-inspired restaurant chain delivered strong increases in sales and profits, prompting management to boost its full-year outlook.

Zoe's Kitchen results: The raw numbers

Data source: Zoe's Kitchen Q1 2016 earnings press release.

What happened with Zoe's Kitchen this quarter?

• Total revenue jumped 27.6% year over year to $80.4 million, as the company opened 11 new company-owned restaurants during the first quarter and a total of 33 in the last 12 months. An 8.1% spike in comparable restaurant sales -- consisting of a 6% increase in transactions and product mix combined with a 2.1% price increase -- further helped to boost revenue.
• Restaurant contribution (defined as restaurant sales less restaurant operating costs) increased 29.4% to $17.7 million. As a percentage of restaurant sales, restaurant contribution margin improved 30 basis points to 22% as lower commodity prices more than offset higher labor costs.
• EBITDA (earnings before interest, taxes, depreciation, and amortization) -- adjusted to exclude pre-opening costs and losses related to equipment disposals -- jumped 28.3% to $8.3 million. Net income -- adjusted for certain tax-related items -- surged 88% to $1.1 million. Adjusted earnings per share soared 100% to $0.06.

What management had to say

"We remain focused on key growth strategies, which have amplified our position as a leader in Mediterranean cuisine," said CEO Kevin Miles in a press release. "Our menu additions have been well received by our guests, giving them new reasons to Live Mediterranean. Our successful openings in the first quarter, including our new Denver and Kansas City markets, bolster my confidence that guests in all geographies desire the quality and convenience Zoe's Kitchen offers."

Looking forward

Thanks to Zoe's strong first-quarter results, management boosted its guidance for fiscal 2016, including:

• Total revenue of $277 million to $281 million, up from a prior forecast of $275 million to $280 million
• Comparable restaurant sales growth of 4.5% to 6%, up from 4% to 5.5%
• Restaurant contribution margin between 20.5% and 21%, versus 20.3% and 20.8%

"We are on pace to deliver on our 2016 development objective of 34 to 36 new locations," added Miles. "By incorporating our first quarter performance in our full-year outlook, we are raising our 2016 revenue expectations, and we look forward to our continued success."