Please ensure Javascript is enabled for purposes of website accessibility

Why Zoe's Kitchen, Inc. Stock Has Plunged 51.7% So Far in 2017

By Steve Symington - Jul 9, 2017 at 9:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Mediterranean-style restaurant chain has had a rough start to the year. Here's what investors need to know.

What happened

Shares of Zoe's Kitchen Inc. (ZOES) have fallen 51.7% so far in 2017, according to data provided by S&P Global Market Intelligence, as the fast-casual restaurant chain delivered a pair of disappointing quarterly earnings reports.

So what

Before this year, Zoe's had been enduring an increasingly difficult restaurant-industry environment better than most of its competitors. But cracks in Zoe's armor began to show with its fourth-quarter 2016 report in February, when shares fell 14% after the company detailed a troubling combination of higher costs and decelerating growth in comparable-restaurant sales growth.

Zoe's kitchen catering food


But things went from bad to worse in May, when shares plunged another 22.9% on Zoe's first-quarter 2017 report. To be fair, Zoe's results looked OK at first glance, especially considering revenue grew 12.6% to $90.6 million. But that growth was entirely driven by new locations, as comparable-restaurant sales fell 3.3% and broke a 28-quarter streak of positive comps. 

Now what

That's not to say all hope is lost for the Mediterranean-themed chain. Its early efforts to drive both traffic and transaction sizes higher included the company's largest new menu rollout in eight years late last month, as well as back-of-the-house simplification initiatives to both improve Zoe's guest experience and increase throughput.  

Time will tell whether Zoe's is taking the right steps to return comps to positive territory, and we can take solace knowing this is still a relatively small business in its early stages of nationwide expansion. It's also worth noting investors can pick up the stock now for significantly below Zoe's $15-per-share IPO price. 

But for now, until Zoe's can stem its downward momentum and prove to investors its efforts are yielding fruit, the stock will almost certainly remain under pressure.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Zoe's Kitchen. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zoe's Kitchen, Inc. Stock Quote
Zoe's Kitchen, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.