Potbelly’s second quarter was marked by continued same-store sales growth, strong digital engagement, and accelerated shop expansion, leading to a favorable market response. Management cited menu innovation, including the introduction of the Prime Rib Steak sandwich, and enhanced digital channels as key contributors to increased traffic and transaction values. CEO Bob Wright highlighted the impact of Potbelly’s “five-pillar operating strategy” and credited the team’s execution, stating, “Our menu innovation and digital investments are driving profitable traffic growth.”
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Potbelly (PBPB) Q2 CY2025 Highlights:
- Revenue: $123.7 million vs analyst estimates of $122.6 million (3.4% year-on-year growth, 0.9% beat)
- Adjusted EPS: $0.09 vs analyst estimates of $0.09 (in line)
- Adjusted EBITDA: $9.63 million vs analyst estimates of $9.19 million (7.8% margin, 4.9% beat)
- EBITDA guidance for the full year is $34.5 million at the midpoint, above analyst estimates of $33.76 million
- Operating Margin: 3.4%, in line with the same quarter last year
- Locations: 440 at quarter end, up from 425 in the same quarter last year
- Same-Store Sales rose 3.2% year on year (0.4% in the same quarter last year)
- Market Capitalization: $388.8 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Potbelly’s Q2 Earnings Call
- Todd Brooks (The Benchmark Company) asked about the timeline for realizing the pipeline of over 360 franchise shop commitments. CEO Robert Wright explained that while some agreements allow up to eight years for development, incentives encourage earlier openings, and multi-unit deals can result in multiple openings per year.
- Brooks (The Benchmark Company) also questioned the balance between corporate and franchise expansion. Wright said Potbelly will selectively pursue company-operated shop openings to densify key markets without hindering franchise growth, emphasizing that company units will focus on markets with strong margins and lower construction costs.
- Jeremy Hamblin (Craig-Hallum Capital Group) inquired about the components of same-store sales growth and menu pricing. CFO Steve Cirulis detailed that sales gains were split between transaction increases and higher average checks, with pricing contributing a modest portion and mix effects slightly negative.
- Hamblin (Craig-Hallum Capital Group) sought clarity on upcoming menu innovation and the timeline for new launches. Wright confirmed ongoing tests of new items, guided by customer research, but refrained from specifying launch details until tests are complete.
- Mark Smith (Lake Street Capital) asked about returns from remodeled shops and prototype updates. Wright shared that early results from remodels and new shop designs are positive, with ongoing efforts to reduce build costs and enhance shop performance, though specific return data is still being gathered.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will focus on (1) the pace and quality of new shop openings from Potbelly’s franchise and corporate pipelines, (2) measurable lift from menu innovation and digital enhancements, and (3) early returns from shop remodels and prototype updates. We will also monitor commodity cost trends and consumer behavior, especially regarding digital sales and value offerings.
Potbelly currently trades at $12.85, up from $11.53 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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