NDLS - Earnings call transcript Q2 2022

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Operator

Good afternoon and welcome to today’s Noodles & Company’s Second Quarter 2022 Earnings Conference Call. All participants are now in a listen-only mode. After the presenters’ remarks, there will be a question-and-answer session.

As a reminder, this call is being recorded. I would now like to introduce Noodles & Company’s Chief Financial Officer, Carl Lukach.

Carl Lukach

afternoon, good and you everyone. Thank second Welcome earnings XXXX to our call. quarter

few Dave me start Chief a this with Boennighausen, by matters. afternoon over to Here like is our I’d Executive going regulatory Officer.

forward-looking portions the considered are remarks to Litigation statements our projections, within in future relating materially the your of may events, During meaning our such the events the release company’s in statements Act. news results including the the of the set and for performance items, time uncertainties. only uncertainties forward-looking response of company’s future statements or a the of opening Private actual regarding financial cautionary to be and Any Commission. Reform you the questions, Harbor performance this filings Form to from and Such we should XX-K and files forward-looking considered to call, documents this Exchange I’ll and make company’s company. future annual details XXXX or Securities Safe on related those to a and Securities the the statement could risks the The differ projections fiscal year from forth with part refer number due including conference its and risk subsequent afternoon’s with statement report statements. time of are the each SEC in that to

materially identify its factors from Form differ our for Each on annual XXXX year actual and the Specifically have statements. or report forward-looking in cause contained result that filings important XX-K made. projections and fiscal company’s documents those contain could to subsequent we

a information. performance. in our company's discuss believe substitute which our XXXX will most GAAP. for on we release comparable not and as second in these can measures prepared the quarter operating be should our accordance evaluating in useful During measures earnings considered to is directly or be the isolation call we the A These measures financial supplemental with of measures reconciliation GAAP available results non-GAAP

Dave Officer. it turn Now I Executive to like to over our Boennighausen, Chief would

Dave Boennighausen

Thanks, highlights volatility to spend quarter I from growth like I'd confidence the Carl. met despite like would level achieving expectations market today strategies our towards of second the some also accelerated results, environment. some time And good by which our afternoon, in sharing our XXXX overall everyone. our objectives. start addressing and to

temporary pre-COVID a revenue $X.XX volumes meaningful staffed to quarter. of XX.X% closures highlighted relative Our variant our the $XXX.X And impact of what's unit compared restaurants million in comparable from momentum challenging we levels. system sales average company pre-COVID the by second of reflected recaptured million. restaurant including level quarter now QX, wide of the X.X% to Omicron first restaurant of due first After X.X%. margins XXXX record levels. XX.X% above to above That quarter restaurants And are

growth to accelerated again I finally restaurant strategy, million on-going of unit to As commencing which by XX%, would like we by move our level $X.X first, in at least growth you objectives, AUV Second XXXX. margin and include XXXX, XX% XXXX, remind our

quarter inherits our to today's growth with unifying unit from [Indiscernible] has of in food half. million million is start clear second The QX brand travels in flavorful Let's made meet X.X completed a a in over years growing last our will the of particularly our and the target of how and brand's average menu, few continued our million the The XXXX. consumer, progress to positions in for average digital XXXX variety volumes. and in ability with recently our the company strengths, the X.XX needs

quickly is of some quarter. recent of we industry, trends QX, the sales sales comparable into during restaurant last restaurant the stability stabilized the softening throughout beginning have witnessed all part third and our current in expect of sales the encouraging. That in sales we've we As The and positive experienced our said, QX.

the recognize near we difficult environment term However, economic to is unstable and predict.

introduced reminder, during is XXXX the driven by our difficult to strength well in variety LEANguini well recession, more protein brand's replicate less our carbs menu XXXX the price offers down not strong of a sales our or XX% home, This in strength comparable great From traditional proposition our menu trade as consumer in as as our value sauces, innovation, level restaurant a than is the a artisanal wheat a towards to achieved net competitors. that beneficiary to the offers by LEANguini restaurant positive and and offering, the our to though, noodle at point. As XX% bolstered entry which as environment. of recently company be softer succeed more other ability ability pasta, environment easy

menu priced our as level proposition at supported favorites Additionally, entry popular are dishes $X, we is the digital that our including did have of This we during communication not to into are messaging such leaning point & from that our and economic Wisconsin Cheese. engagement derive and strength core able strength ecosystem price we downturns. seven core by prior of the asset and our with are and and value that further insights rewards Mac increased program

is seeing capability which have food we areas improving fine tune and us with trial we frequency expect associated engagement the metrics. and and In loyalty. business, for strengthening improved to experience these continue guest will the to guests continue evolve to and are repurchase, Our of you our streamlining consumer digital and to tasty relevant increase recent meaningfully is our and of metrics in higher awareness LEANguini continue can to develops months that personalized, coming drive leverage guest months, frequency and

& our LEANguini believe trial to amongst commercialization that guests last continue and We to from be and shifting introduction alike. now a for new, Noodles introduction will focus transformative Company with loyal increasing

second third anticipate in our of and coast variety restaurants our over company sales restaurants comparable a different we restaurant stabilized second nearly the to While prepared unit objective coming sales strength and for quarter, average for of months, target the us restaurant million our achieving formats. accelerated during XX% we are level positive achieved potential volume coast of in XX% margin noted a XXXX. have accelerated during Moreover, and was these growth volatility I quickly a a brings average a as half of objective, growth XX%, The margin restaurant which with to at from by quarter. restaurant

year more combination commodity our reminder, normalized that execution our I initiatives But XXXX. included thus XX% we're some QX results to of XX.X%. As far level efficiency has inflationary seeing discuss and a in further, our the restaurant challenges of environment remains inflation in unprecedented sight. led markets, last Clearly of margin pre from of that with the now target will

been most challenging has recent story the sold months. goods of cost know, in area margin you the of As

XX%. points highs. Our XXX for approximately recent cost sold the confident quarter pressures. from into our declines later peak COGS we the will inflationary our of and have in goods are more chicken in of ingredients Several cost of seen meaningful reached basis that above durum of have we but depth XX.X% target historic go second sales, Carl particular was importantly, key

significant efficient Additionally, breast our we cost more chicken of are a cut rolling in with currently it. out boneless

QX items through during of given the we lower While with system, execute lower timing quarter. cost we our the saw mean that COGS the meaningfully rolling second elevated as to three expect QX COGS our and

and level beginning from XX% recent normalizes as XXXX see areas of additionally we business costs P&L. other are area the percentage Delivery also strong target on As in of of fixed actions. sales our we come down several consider seeing restaurant this we elaborates as margin, our the opportunity price fees to of are

Additionally, particularly alternatives accretive, with of the technology to cost over the menu current eliminate and the both on eliminate favorites, drive to select and including higher focused key our prep improve ingredients company to consumer items. better margin short within and support restaurants and highlight margin activities optimization few both long select restaurants, that protein on expense high and optimization and testing preparation, of menu term, is items our to focus introduction a are activities efficiencies guests behavior ROI our expansion our

Importantly, our advantage issues growth unit reflected XX% credit no have and surprise restaurant timeline. margin gives well delays, is are positioned supply pursue we target. least our of in landlord XXXX. refinance the additional challenges restaurant to level these restaurant the EVs objective, space added growth expectations for potential factors currently high stronger XXXX accelerated third and typical to and With at taking and wide of That's us tremendous other to of facility, chain our brand. XX% to the by external take today, including and implement municipal achieve development unit our advantage that It's for certain margin, level return achieve to which we announced which flexibility initiatives growth

our remain we However, target. confident term in long

resources in many cost return into point are of seen that execute in improving objective. bolstered is XXXX. classes, oriented restaurant And a input at pipeline, development to is to stages including Moreover, our our in as in LOIs an suburbs square least to has we The than which improvements of allowed AUV deals favorable our and off-premise cost, XX our year, well have of XX% phases that of an the see million stages development. achieving number much in by deals unit either for growth us lower more our we or our growth as cash the this Fortunately, currently pipeline, all is various supported in of overall above in half our XXXX the is which final company is confidence today -- Vegas, our We negotiation was are of objective. real environment in last Las success complete sits estate of at estate Company. with on stronger XXXX the cash support it first a and tracking real strongest ship significant This & three more footage seeing pipeline as of recent it already XX% I have in by Noodles years times prototype. is

program. growth is making progress are supporting our sales we objective our in Finally unit franchise

large agreement seen stages part a We are the the pleased recent been of of in in the for with in very months. States interests we final in United the southern that have development have franchise area and increase an

the short to it brand my turn like to to term, and as salary as succeed achieve positioned confidence over in I well objectives. I'd growth how well the As our is reiterate Carl,

positioning strong consumer brand more unique to navigate value environments. with us offerings a challenging allows Our

engagement Our insights the model, negatives take us bolstered consumer operating to to low return tremendous ecosystem advantage of the our improving brand widespace high footage guest allow square potential. allows digital strong drive and and by

over Now turn like it I'd to to Carl.

Carl Lukach

everyone. volume reflects our record million, including afternoon, results, second good And unit continued pleased Dave. you, which momentum. I'm recapturing average of quarter X.XX share our Thank to of

for revenue restaurants. X.X% a a to Comparable X.X% X.X% last total second restaurant highlights, In at increase and of year. Franchise terms company comprised restaurants, system owned financial of increased the compared quarter increase to the sales a $XXX.X X.X% million increased wide,

Our payments net of locations, revenue negatively quarter approximately January from second which loss $X.X sale includes million revenue was California of and was we estimate our impacted XXXX the royalty received.

be million X.X% for the accretive reminder, that a XXXX our pre-COVID As year XXXX. increase XX.X% revenue our future volumes last in Underlying growth, will quarter, EBITDA in levels a and from neutral X.XX average years. increase unit and for an versus transaction were

sales quarter, June. mentioned, some in part Dave during As of trends the experienced latter the softening in particularly we

XXXX. growth noting from were X.XX represents which unit volumes However, pre-COVID it's in June, volume in average that XX% our million, levels worth unit average

are We remained far that these in AUB at stabilized July. have levels, growth XX% encouraged approximately thus quickly at and

our nearly points add quarter, and driver Restaurant of both restaurant quarter choose our the over was an which XXXX, unprecedented XX QX the to second to chicken of guests peaking quarter quarter with XX.X%, decrease of basket, XX.X% a in remains which of The the as chicken of May. at material XX% inflation compared of basis XXXX above most margin in did vast from the XXX boneless historical to points points improvement levels to majority norm. of sold, all second but X.X%. was second the price noodle white the with decrease our dishes. contribution rose basis our first improved throughout meat quarter the end our basis cost breast their relative XXX as of on chicken found margin that of the of For The goods at significant levels first cost

XX as those estimate for versus peak market of Adjusting as in declined And the anticipate continued the However, basis decline through we quarter chicken today, COGS is XX% a we in already third in historical improvement that distribution will our to from the point processing July. exit price systems, normalization. lead levels highs. we the

our in strategic to the be variable remain which this volatility pricing benefit both realize the our given who chicken a by market. flexible remained purchases able are having was with pricing on We fixed vendors, set to high and vendors to our will decision driven unable in

remain of XXX to and this by the initiative vendors the quarter Additionally, positively our way breast we stable. be October, during basis able breast chicken COGS the a third in more reduce out initiative chicken same end existing fourth high and beyond. have is and impact vendors to The runway of the of are strategically expected quarter worked areas Other optimize commodity improvement. largely waste. cost our basket the new impacting nearly to of required deliver with our in These now points effective to cut boneless of fairly quality rolled is reducing This complete preparation. COGS the further

some across produce like basket wheat, our areas increases ingredient more dairy our costs are and process. favorable in We modest a seeing of core such durum but

chicken the and closer were XX quarter than better quarter levels sold more XXX points COGS mid-to-high For benefits third goods is the to realizing points ahead favorable first fourth and efficiency XX% basis of Labor pricing expect the of the for quarter quarter which quarter costs second cost initiatives sales, we we the area. of below see during slightly when anticipate last to for unfavorable year. our basis of the XX.X%

to future quarter benefit expense our initiative, in operating of year. wage Goodness our has of versus during of to wage is Uncommon with rollout XX Other from XX% impact XX.X% increase costs inflation, for increase of second quarter which This and to somewhat, of margins platform with expense full kitchen we Our label will annualized year. largely sales prior driven an X% quarter anticipate the in increase elevated us marketing allowed points the was compared be the continue inflation related second labor line continued margins of the which XX.X% by grew the nearly offset levels. quarter to expected an launch continue While third the moderating prior to was quarter were the basis for of to in Marketing LEANguini. our the sales, levels

level to to increase marketing offset by normal We during to XX%, to expect quarter a second third quarter at due of as expense other during level approximately the be operating third the seasonality. utility X.X% to similar our sales, quarter quarter. the normalizes Pricing anticipated we was in costs maintain of expect an second just north

non-cash G&A million to G&A to We for based price resistance guest includes This last point stock fact most entry last to $X.X been pricing are fortunate allowed point during price us year. party few that was compared core value of relatively maintain our delivery. $X.X with compared to around stable level million million an has $XX.X $X. by attractive proposition a the take third million $XX quarter, meaningful bolstered as has concentrated years, year. of the price the the second has last without been during on quarter compensation strong

of For $X.X the $X.XX share. the anticipate share, year, approximately compared million we quarter, net in per second third or quarter, the $X.X income million second or in $X.X line to for net stock per quarter $X.XX with based income G&A was compensation. diluted million diluted GAAP last and

net the report impairments, and also basis, which We adjusted income closures. adjusted of divestitures impact an on

compared of per per second $X.XX diluted to last adjustments, diluted year. million net $X share net these income $X.XX million Excluding quarter $X.X or income was our share, or

to cash given be future through for other our of and a payer do we foreseeable tax NOL outlook. remain to not sizable rate tax Switching XXXX the to and effective low tax expect our expect million. credits over our atleast We $XXX

that of Labor the of negative between to sales XX% first For costs during holidays. to at and level contribution particular range the part both restaurant digit $XXX.X historical range XXXX and reflects with growth $XXX.X absolute low third our margin midpoint containing the quarter, the growth the we relative volume revenue as to The assumes restaurant single third approximately elevated anticipate positive our anticipate stabilization of total From and unit million comparable third sales. XX% average Fourth between million margins Day on in we quarter perspective, the expected to the is quarter July third of remain of a XX.X%, quarter. impact

We full openings During reflecting anticipate the XX for the including quarter, company locations, we owned. prior are XX openings third new opened all the of year quarter. unit X% year, four growth during versus which to three

capital to and For $XX our expenditure supporting we previous from million million $XX mobile and new $XX of guidance expect of million to the continued $XX growth million full year, app. now unit website our of innovation

equivalents Turning to $X.X $X At $XX.X down balance we debt the end, million and relative first and million of balance cash a approximately the approximately debt quarter. quarter had cash sheet. to total of pay representing of million,

upsize of to agreement We financial borrowing, of components facility, the from loan and XXX pleased amortization term credit overall cost principal the with within company's flexibility. credit the and the million covenants, are our amended credit yesterday, the eliminated closing of improved the facility lowered which XXX enhanced very spread million

objectives call that like to are and lender and remarks. support investments. our our our for we amended strong that, liquidity Dave strategic well supportive We over to are profile, With facility, our turn highly capitalized I partners back confident to accelerated with the growth would final

Dave Boennighausen

Carl. Thanks

engage the trade by and the potential the our of dedicated strengths, be guests with of current brand's uniqueness the passionate members of executed very down digital proposition environment, a strong directly industry. consider team all within allows positioning, our team we're we opportunity menu, a our beneficiary the As confident to value and us

our and million objectives the open XX% that, the please strengthens clear a With we XXXX in restaurant to lines AUV pipeline margin approach a we by and remain quickly a and see confident our Q&A. accelerated unit Additionally, half target as progress pathway growth XXXX. level for

Operator

comes Our Instructions] Nicole question [Operator Miller from Regan Piper first Sandler. with

is Your line open.

Nicole Miller Regan

household talk trying your Wondering on of speak evening from in to little know lower you. entrees a to versus thank the land of profiles, end how about income? terms you're income you bit how Can And income $X. then you the much a come Good $X? the cohort did specifically, household sales higher and maybe with seven end at

Dave Boennighausen

actual price is Sure, the point What's starting so already dishes. we'll with of is the of natural price Nicole, for that start actually point that exciting $X. many our

already as we're to what lean To that thing So trends in is terms at great that know of the business, proposition. are low our didn't lot pretty of important one able into your in to is a that we trends we traffic actually the income answer at the small. of And a that's guests value change look the question, saw QX, throughout is all. percentage

Our behavior remained similarly that from very across we what improved in you core consumer all pull saw change purchase low channel throughout channels. frequency is that saw guests no actually quarter, the part, back their income strong, day their real actually

through that data lost. rewards we've our have, potentially see program, that the we Now that other one that's third party we

at that income and a more low entry really and we're week consumer, and and interestingly, that $X momentum trade the seeing started actually, from down Now, already either. we're all, about digital our particular assets encouragingly I just not explicitly our seeing think on just any nice session, some point, price ago, we menu, messaging

low higher for feel done, skew them guest, income great of value guests to towards part address company. So we've of that we that's what's a definitely not new tend that to a the reminding that we able we have But just the income. proposition largest as our

Carl Lukach

Dave income our to XX,XXX. add guests of have XX% said, average about household what over on Nicole to

Nicole Miller Regan

you. Got

too, I Okay. And exactly was that. was that helpful, messaging piece curious about because

price So company then quarter. can X% comp just quickly XX% a I you you and touch think just on the under ran in

the fix Can mixing on? Or fix noise and helped or? that lot just the with spot out? of me a And there's traffic to speak terms I validate was in it So transaction then let part? And help you there. of transaction those if both numbers us in me

Carl Lukach

that correct. Yes, that is is

just and your price of X%. of we're north north So since overall XX% on sales just

there positive forward. So northern of we from of you was did saw that see traffic on was to that traffic but our to the the lead then side side, negative kind stabilized tracking moderate occurred slightly flat closer expected range, flow prior [Indiscernible] point when higher quickly modestly to traffic down

Nicole Miller Regan

Thank much. you so

Operator

Our next Barish question comes Andrew with Jefferies. from

Your line is open.

Andrew Barish

in it Did in the Or do store restaurants of Hey, back into resumption looks mix. that the mix numbers kind that how normal channel think of as that the that surprise impacted guests guys, like and behavior you of that overall, is some component you? just sales? impacted normalization you digital same a much saw just a

Dave Boennighausen

over at course the mix of it's Yes, Andy, remarkably as the been actually we look the consistent. quarter

I delivery but was bit that then point, certain think a a saw little a of that we in there at decline rebounded. quickly

So remarkably actually consistent. it's been

a comes As a to see for reminder, we it the when digital us. always we of leaders been be channel that sales. sticky continuing as one have to very And

of even three QX, or we still north very said, XX%, four have thus into similar figures. still far, weeks So as

more think get the more increase. communication, is great while started time also we we we're our to just on a a insight guest, which to of to to that into as think now at in starting personalized asset more continue is and We we've more with had digital environment, hold uncertain in as our dine being be same sales, able into terms getting

as come opportunity XX%. seeing growth we some the where has still remains XX% to the opportunity. returns. of well There's sticky which So But digital were you're sales dine quarter to still it pre-COVID, about for same tailwind closer still was XX% time, very second as in some back dining during at below to

Andrew Barish

units the XX that pipeline next that top we're, how pipeline, do us think I make that even? the, next openings of development about add is Okay, Did of on then give cadence development little you on units or imagine. more of the on this out took I and just year, a then we those, a And, you year? year, that, kind ramp. so of obviously, more the around, color those significantly mean, stick little

Dave Boennighausen

cadence we ever And it, actually seen were even restaurants we in And is earlier, many the and said stronger I there's already XXXX saw Certainly than LOI times signed, more sites is as here than as that pipeline consider development. I've what three negotiation, sites in have XXXX. leased, sites the are when various our stages in that lease with out. of or I

than any we are several where stronger Company. We really accelerate anytime XX significantly And to that really we were also today last & out in months are at ago, when We're what I've Andy seen XXXX. back we is in that that unit in Noodles years. set the growth, reminded doing at is

We we which years. two gives XX% we potential the several XXXX, would over caused That's that months into in some unusual in will XX what's environment that Back unit most us foresee that have the open we've also target. of that which ago, these growth upside believe development push is restaurants. opened didn't certainly to delays,

Andrew Barish

Okay, thanks for the update guys.

Operator

next Brooks comes Benchmark Todd Our with The Company. from question

Your line open. is

Todd Brooks

new to able that corrects? be of forward One that on to as the what's stickier harvest around longer expecting pricing going based to commodity we're how menu? surcharge going that's going Hey, think of Is thank guys. and afternoon, on a seen recently that prices is upcharge A you're cuts, chicken to response that the you the the type from with status that the you. the even chicken stick of couple Good relief the benefit questions. in you've long and the

Carl Lukach

Sure.

consistent, chicken increase throughout time, rolled that So half Todd update which a off We week and surcharge, as pricing was the an a to temporary ago. reviewed rolled the entire the At has as that spread off same menu. keep menu. we about

So there of is terms neutral effect a in really overall pricing.

right, off decision you're driven take the us to the chicken chicken pricing the for that improvement specifically. So really has

Dave Boennighausen

something seeing on firmly our terms inflationary Todd industry you're XXXX. actually believe that's half mentioned than that the We many position the where more impacted of the a first during to of overall are going that Yes, Carl basket in been start has in we in improvement. call

of significantly rollout breast, market the some that as get that the of cut. we well seeing chicken as around you're from As initiatives lower

that's we meaningfully go to see where speak, able beyond. very As Carl nice at QX lower clearly QX COGS the as than exit and then you system have mentioned, today, being and we worked getting improvement into we through are really as

been kind here has of there's of breast in that that are first better feel inflation an the that some and chicken us now particular outlier caused that side have to on we the half equation. So we

Todd Brooks

Okay, Thanks Dave. great.

get franchise type Second with share question process partner close some probably pipeline that XX? brand, XX, to to on Is we you this you're multiunit means the line. us fold? the you teased operator what there on a finish And to capitalized give as you'd to scale anything the able guess into as that can't is of us towards we multi get another California of on this deal Is being large bringing the visibility in as I the far compared sense well the that yet. But where are deal?

Dave Boennighausen

new Sure, the unlike deal. the one of a of deal. But Southern as market. the details deal we're final California good more in we've not it I refranchise We'll is is for This finalized. a markets the can share size that's stages gets one that that of share targeted

unit As operators. target and it to reminder multi well alluded a established Todd, you we

of we're past over in capitalized seeing and imagine and interest happy of as But that's of with they in uncertain what increased well high their navigate very few potential quality, overall we're brand. type this these can with the lead partners we're you again, months, amount the the future that see seeing the businesses. own of time environment, it As inflation demand the

particular side. good going So with more where information from to but we're franchise come on that momentum the pretty that deal, feeling the particular is

Todd Brooks

done. on that That's finally, credit then Dave. the getting congrats great, on And amending facility

old some new covenant comment the regarding I relief share facility? prohibiting share talked specifics. Can covenants facility, repurchase. in have know a covenant You the about much repurchase without we on any

Dave Boennighausen

Sure.

first for that. So thanks all, of

It facilities, closing provides on of pointed payments. on specifically encouraged covenants, very our which to is certain with highly us. by us additional amendment restricted are the credit We flexibility you indeed out, the the favorable the

yes, with restricted So demand. topic there. type any discussed enhanced we provide the course, flexibility of does it frequently payment us is And a of

Carl Lukach

Yes, I'm to these work very fat they've and partners giving as with same outcome certainly favorable our Bank, we flexibility pleased been with have a just back the the continue with as U.S. of we've us in pursue the partners bank objectives. lead terms seen

Todd Brooks

Okay, great Congrats, guys.

Operator

next question BMO comes Markets. Our Strelzik Capital Andrew Instructions] from [Operator with

is open. line Your

Andrew Strelzik

I some launched first that My Great, question, the thank kind afternoon. and brand of the challenging and comment on result results went? of anything expected? period, what And just you But obscured that was are can comment you. a during by encouraging with Can good had line you what of drive was guess, Are Or obviously, like that? you what that of the you building macro. saw how as initiatives, with happy or sales a the you campaign. the in a any LEANguini you couple tweaks

Dave Boennighausen

to question. With associated right we great we're Uncommon increase really well what very higher frequency with LEANguini it's trial. Goodness. LEANguini repurchase, seeing both the saw as objective Yes, with on And we're as launch as from now pleased is test, higher

do difficult this it from the them they As quality you know, give their benefits. they're we see tastes be people shift to in favorites. particularly when at interpersonal LEANguini, can familiar to that environment, that But get try amazed

transformative side. culinary very is a still So believe much a introduction from this

leading that short the our traffic brand, term of we where do quality well real, of cooking As long all seeing, track and driver, improvement into regard We're more Uncommon brand very actually of we treat term ingredients. seeing to infuse the brand it's we we sophisticated of we're how do. how From those, perceptions, internally. potentially, some for showcasing of to less power every just with nice aspect indicators because across people, Goodness the of we a this positioning Uncommon the a saute but pleased externally, methodologies how our of Goodness, as as not

think foundation grow Uncommon more the a with going correct. dynamics lot finally. So There's million that we’re forth. and is factor underneath market with we you a around the and seeing LEANguini in as so talk inflation are to be what overall we're to obviously But and noodles, very pleased Goodness, industry key a the

Andrew Strelzik

I was then because opportunities, Okay, lot a frame great. there's it help like could the And there. sounds COGS I just hoping you guess different

You internally have cost working mean, new you magnitudes have realize you're cadence trying there's the should of to try I'm are I or saving you impact frame to can that quickly start chicken frame to that maybe they agreement, coming down, some other efficiencies a the it sustain? also the the just, have how that the on. that some have? or of decline commodities could you could It potential kind lot you commodity

Dave Boennighausen

that through that. known one the a thing we'll But important aren't one through note system. Yes, think matter walk let that These savings. is it's these are them Carl that working I it's to just of

in when it's imagine, you will the the you get but not this start order. purchase afternoon, As they that through short can morning, that time chicken savings system, to guest plate are takes going realizing to some known

of few a few a through on go can we those. maybe Carl, So

Carl Lukach

And volatility. components. really Dave Sure. savings, behind here. There's to in market chicken us And terms is major in terms the the of outlier of the the two worst is alluded as

vendors and points. waste, reducing initiative is The run purely where it's COGS point down we're for for with ruminate prices And the a that by XX is That's rate basis expecting efficiency, historical has just XX% is second which that executing about initiatives that's are first just our and today. price chicken, improvement run on on highs. the of about the rate come over a XXX The basis we're

XXX XX% through total to forecast the COGS competence get to quickly times we're in. in XXX going where and quarter, in That's XX% So working we adjusting fourth really lead about our there's mid in And the points, the high that area. inventory certainty for really and systems. basis

Andrew Strelzik

Got it.

Okay, that last makes quick sense. And just me. one for one

starting of at there You a sure be you. to point? you've XX%? that that system a stores COGS top trying you are XX or reason in are said would XX% different the I'm doing limited target. on to ahead nice just above And pieces. to in we Thank just start these from maybe the I And Or build there, understand the then rest AUV? that the the is is make even then restaurant of XX% in the of savings, which already is that coming the AUV that, million margin, at a got obviously,

Carl Lukach

are feel the Yes, you itself, those – of has you absolutely. the is in concept restaurants labor absolutely improved really there to sales that know great historically, strength really five don't premature, million that to grow strong and sold a near But future, make those model see XX%. at significantly leverage fundamentally, be being yes, that and And with the given environment. efficient. it And uncertainties cost low north the the of continue more capability goods in to in think we

said, to we absolutely there the where certain ultimately could upside. So need areas. be That see markets be to land there's recognize believe done, we we in work

as confident So of XX%, as been, in less level margin. we've restaurant terms that we

approaching just a we reminder, a As year ago, XX%. were

we operating actually quite strong. So know was the model fundamental

Andrew Strelzik

Great. much. Thank you very

Operator

Benchmark comes question Company. Brooks at Mr. next Our the from

Your line is open.

Todd Brooks

thanks. Hey,

quick Just I may. guys, follow a if up,

of so talked pullback You June that kind far and average about in July. the that the in maintaining stabilizing, unit after stability, volumes you saw

want triangulate Just the low a the type a store level, level does single same that AUV support same Or to the we quarter of to sales Thanks. single X.XX get store store digit, do require low bit that single low same of lift digit, Does digit guidance. progresses positive as positive positive of to to sales? that that sales?

Dave Boennighausen

Sure.

unit there looked we So for at average the, closures. third the first, growth, the volume, quarter, look we a way at for normalization is as

of will and stability a for trajectory we terms the of July, in we're think the as the be So somewhat the so of rest closure impact. about what in there far quarter, seeing,

help So store digit, the support same single sales. low that would

we third a second basis I'm for year, the a As reminder, quarter, last in points quarter, saw closures. sorry, comp from XXX about the perspective in

Carl Lukach

bit we add what QX to your targeting Yes. in there sit for and relative dollar it, July what point, we Labor seasonality Day absolute much here the have The range more which And we doesn't also our though, already we're both little of we're as Todd, from Fourth QX. have a as is figure, you to to today, to see impact. in are in QX, QX, in for

central that sales. XXX higher to mathematically translate So actually, even would

Todd Brooks

Thanks, guys. great. Okay,

Operator

with Jake comes Our question next Truist. from Bartlett

line Your is open.

Jake Bartlett

frame, My low want sales build your if to you just on in taking digits. thanks things trajectory terms of maybe your I trend the questions. And Great, last or guidance that first the could the single sales kind of one. to in of for explicitly in relation

So call I I that April as did up like and X% if it was of say sales? the essentially that that, store got you low it came sounds so in same right, then July, you've just last roughly believe, single digit seen went down.

just would months just help us with could of helpful. you're in be or your trajectory the what came and You sales last month today, the same what the store really running five

Dave Boennighausen

here seeing as so said, those And single the We're positive, underlying some are we so bit low far digit Yes, a started highlight we to in seven even potentially for we July, in and as stabilization Jake. encouragingly, improvement in little metrics. continued $X. of of especially

now in timeframe. As little single actually immediate and a bit. helps couple were you flat than that for weeks of saw the say reasonably June should digits actually three of the see bit PX you or so some last ultimately, strong, was two I then in June, But just of in time, the June, last back. late softer bifurcate started that low stabilization, past QX, and [ph] sort that of the it then the quarter, or actually off out then deceleration a June to Hopefully, fiscal sales starting saw bounce weeks, month that

Jake Bartlett

trial like think, $X an Okay. forward of else getting frequency are on driving Anything offset, material, intangible from boost How from we of really the terms And drivers help of incremental So, you're sounds of the further LEANguini? drivers the effectively, more to as of marketing us kind about can you the talked here, then, confident understand concern in consumer? you going with you some about, are sales? menu. kind or weakness the some of

Dave Boennighausen

started Well, continuing increase we've we've two, here we the are that of impact, to that's see in just showing week I be in the fact the last seeing week the having done whether mix confidence part a momentum comes lot which or that it actually after from week. LEANguini, efforts of some think an

to we kind continue a will as go will a our be we go of sales forward be So feel driver operations. of as just that we be burn, that continued into slow to

what they we you months, the a dine seen as score as as our seeing metrics Staffing or guests do see that. our been delivery and several we've in are at tailwind cook than did able digital that year net is to with will last the a our guest running improved are retain as we numbers, better We come help promoter teams have ago. dramatically over back levels, you've prior to more times the

looking reinforce QX. during nationwide catering as some a already few between potentially mention feel we're some be around will culinary first out we of there seeing a the Not innovation, go gaining So really LEANguini marketing, QX, to at tailwinds. for that We the digital strengths we of traction, into some potential rolling quite still kind years, in plant bit seven. time seven momentum, for targeted will the there's of based protein

unit continued to innovation target. help well have we'll pipeline growth average So as volume support that

Jake Bartlett

to a XX XXXX, from large XX the And development openings. decrease XX obviously pretty Great. then, for to on new

How XX%, you expected be owned company be before so, expecting that to would us are given of we're the And of those to XX company owned? many XX. to to be

Dave Boennighausen

being examples, XXXX. like strong. development in companies able that the seen It's get turn we things complete to navigate seen able a the their to are encountering give just we majority, estate quite from not we've power through in we We've delivery early Ultimately, the timing. availability with staff to get environment when it targets industry vast be same challenging three only here timing set would or the The that perspective, new be time. foresee will asphalt to how that you day XXXX, the having the actually four we've been Again, those real throughout us. that They're challenges the some And on have didn't see to hope to well. of for been base we seen, franchise. there as building likely is utility and developers and not

benefit but permitting But seen seen confidence also in longer as lot we've see great of by well. we that historical so sites also some than take longer, have gives the we that got confidence not of XX. the has company, carryovers of just XX of that You've the though taken target much of some strength of for of some as franchise in that been see the pipeline, us these

Jake Bartlett

you about just the just when it's rolled is impact great. the you're pricing going new you your what's XX%, us more you no longer to about can pricing. just, that help whether then we price price. quarter was have if impacted even you And too, when open, that some also what on, second surcharge, competitors Okay, when terms continuing the of healthy on into will question environment? in this mentioned going my take $X be be it's visibility in also the that's think And in for to last you're take And any your is margins. think larger kind third what when in of then now come price, taken your off, wondering understand that's it's But, just XX% in quarter, to if appetite so can an of And fourth quarter. you've pricing

Dave Boennighausen

overall let timing the Yes, value questions, answer Carl talk the through some of roll off I'll proposition. and

Carl Lukach

That's second the quarter. right, for so right you're

We for opting the place, swapping protein, other chicken attachment. guests in really chicken or see chickens didn't of not about when rolling that chicken which surcharge have is same of in core for X% of in just did surcharge terms contributed menu. of predominantly the protein XX% over because attachment, over quarter the see impact we the we expecting or Encouragingly, we're terms price and had pricing third towards we any out

entry the core we our of an terms we of point. price again, because menu. When predominantly, So But that that critical inelasticity the through we the seven at dishes. surgically were for build have entry thought the we surcharge still terms to of on entire really preserving the this of in continues menu, look dishes, in pushing about confidence $X our points throughout that's

And price out, that just helps So to to that. by pushing proposition. we able value preserve even that the were underscore

Dave Boennighausen

terms have others terms of income I we in That's the things. consumer have in seen some on additional think price, some of Yes, similar low pullback. impact

for much would the is now inflation, Fortunately, peaked. consumer. particular little that again, the of us, for on other I we that's say unique, is bit what not are Jake, it. a believe our And of us, we side maybe has

pricing seeing is margins down can enough when to we to reminder, say feel dramatically we you we we chicken absolutely comes So come absolutely breast. the dramatically, in side without having a we to roll have terms we inflation prices momentum But don't go of believe Not down. to we inflation, rank believe as as power, that to start do. it’s needing additional down these pricing in, the pretty of as overcome actually chicken see that incremental you chicken there on breast we are that for menu. expand see can initiatives And of that some see

Jake Bartlett

and one. quick one just sneak I'll Great, then

mentioned, XX% inflation. You wage

back think start laugh as of would just imagine, industry wage well last as from to higher I you half inflation the I wide year.

are range? is of high you Or historical what going planning come is expectation to for year. for to back So the quite wage into that your a more remain kind inflation of the half

Dave Boennighausen

is inflation. see Embedded into some to our high relatively QX we guidance that continue

many that throughout of signs just not to And we of above digit, in this teams kind of our investment lot there So similar industry, normalize. during the half a double are XXXX. that seeing others, starting to is did the but back you're throughout economy, the

there's what potentially a number kind inflation probably some of assume But this year. to QX to guide to would bit premature of that in expect would we into relief we there. that mathematically, So be

Jake Bartlett

it. I Thanks. appreciate

Dave Boennighausen

you, Thank Jake.

Operator

no There remarks. I'd closing any are like to over call for back David Boennighausen to further turn questions. the

Dave Boennighausen

Thank you, Michelle.

But and extremely tell and our meet objectives. I outside inside our brands everything trajectory You business's economic the we know, current the to to lots from you of environment, from remain our perspective, demand in ability the inflation. will discussion confident on industry

And growth those signs margin on we sharing future the toward positive initiatives. a of and Importantly, have to those we're look we're of our unit you path on side we forward accelerated seeing progress clear with feel strong both and expansion. call. We

and So you safe. thank stay

Operator

the program. This concludes

a now disconnect. day. Everyone may great You have

Noodles & Company (NDLS) 28 Jul 222022 Q2 Earnings call transcript