Mediterranean restaurant extraordinaire Zoe's Kitchen (ZOES +0.00%) had an excellent IPO in April and continues to perform well after the IPO -- it's up around 30%. Now that the company has turned in its first earnings report as a public company, investors want to know if this story is all hype or if there's something fresh about this chain.
The earnings report
Zoe's just reported its first-quarter 2014 results, and they were good. Here are the highlights:
- Revenue up 47%
- 12% unit growth (just this quarter!)
- Adjusted EBITDA up 43%
| Company | Comp-Sales |
|---|---|
| Noodles & Company | down 1.6% |
| Panera | up 0.1%* |
| Potbelly | down 2.2% |
| Chipotle Mexican Grill | up 13.4% |
| Zoe's Kitchen | up 5.7% |
Source: www.zoeskitchen.com/locations/map-view.aspx
Does the concept resonate?
So does the comp-sales increase prove that Zoe's resonates with customers the same way that Chipotle resonates with its customers, or is the Mediterranean chain just geographically fortunate? There's compelling evidence that Zoe's indeed has a Chipotle-esque following.
Zoe's claims that 70% of customer visits are from "educated" and "affluent" women. By educated, it means women with college degrees. By affluent, it means women with six-figure household incomes. These women are busy, so they are looking for a quick yet healthy food choice. Considering that it prepares all food from scratch daily, and doesn't offer fatty fried foods, Zoe's wins the business of these women.
However, Zoe's may not be as healthy as it seems, as demonstrated by a comparison between Zoe's Chicken Salad Sandwich and McDonald's Big Mac.
| Sandwich | Calories | Total Fat | Cholesterol | Sodium | Total Carbohydrates |
|---|---|---|---|---|---|
| Big Mac | 590 | 34g | 85mg | 1070mg | 47g |
| Chicken Salad Sandwich | 700 | 47g | 65mg | 1000mg | 41g |
As you can see, there's not a whole lot here to be excited about health-wise. But sometimes it's less about reality and more about customer perception. The fact is that Zoe's is targeting women with food that is simple, tasty, and fresh, and 17 consecutive quarters of comp-sales growth suggest that Zoe's is succeeding in selling its desired image to consumers.
At the end of 2013, Zoe's had 102 locations. This year it plans on opening 30 new locations -- or 29% unit growth for the year. And this year's no fluke. If anything, this year is a slow year. Since 2008, the company has averaged 38% unit growth annually. And at just over 100 locations, it has a long long way to go before it reaches its 1,600-unit goal.
Final thoughts
To sum it up, Zoe's is a new concept resonating well with consumers, which is leading to market-beating comp sales and stellar unit growth. The chain looks well positioned to execute its long-term growth plans and cash in on these consumers who are buying into the Mediterranean zoe -- the Mediterranean life.





