What happened

Shares of Zoe's Kitchen Inc. (NYSE:ZOES) dropped as much as 12.6% on Friday despite better-than-expected second-quarter results from the fast-casual restaurant chain.

More specifically, Zoe's quarterly revenue climbed 12.1% year over year to $74.3 million, as contributions from new locations more than offset a 3.8% comparable-restaurant sales decline. On the bottom line, that translated to net income of $0.6 million, or $0.03 per share, down from net income of $1.2 million, or $0.06 per share in the same year-ago period.

Analysts, on average, were looking for a breakeven quarter on higher revenue of $77.7 million.

Two couples passing around catered food from Zoe's Kitchen Inc.


So what

For perspective, investors should keep in mind that Zoe's stock popped more than 9% on both Wednesday and Thursday, with the latter move driven by an encouraging analyst upgrade just ahead of Zoe's formal earnings release.

"Results in the second quarter remained challenged," explained Zoe's Kitchen CEO Kevin Miles, "however, based on improved quarter-to-date trends, we believe we are still on track to meet our full year guidance. In the first half of this year, we made meaningful progress on multiple strategic initiatives."

To be sure, Zoe's is pleased with the introduction and early results of its revamped menu, and only just launched its new website -- which notably features improved online ordering capabilities -- earlier this month. In addition, according to Miles, Zoe's is on track to launch its new mobile app and loyalty programs in the third quarter.

Now what

Zoe's also reiterated its most recent full-year 2017 guidance, which calls for revenue between $314 million and $322 million, comparable-restaurant sales of flat to negative 3%, 38 to 40 company-owned restaurant openings, and restaurant contribution margin of 18.3% to 19%. 

All things considered, apart from Zoe's slight top-line miss, this was a solid quarter that should please investors. And judging by its modest decline after two strong trading sessions earlier this week, it appears the market feels the same way.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.