CHICAGO - Potbelly (NASDAQ:PBPB) Corporation (NASDAQ: PBPB), the well-known sandwich chain, has finalized six multi-unit development agreements to open 32 new shops in six U.S. states, marking a significant stride in its franchise-led growth strategy. These states include Arizona, Illinois, Missouri, North Carolina, Texas, and Virginia. These agreements, which were all signed since July, are part of the company's Franchise Growth Acceleration Initiative, aiming to significantly increase the number of franchised locations.
Bob Wright, President and CEO of Potbelly, expressed enthusiasm for the growth seen in 2024 and optimism for the momentum to continue into 2025. Lynette McKee, Senior Vice President of Franchising at Potbelly, emphasized the importance of partnering with franchisees who share the company's core values and commitment to service and quality.
The expansion comes on the heels of a recent announcement to open 15 new shops in the greater Atlanta area through an agreement with Royal Restaurant Group (LON:RTN). Potbelly's long-term goal includes reaching 2,000 shops, with at least 85% being franchised.
Potbelly, which began in Chicago in 1977, has grown to over 425 shops across the United States, including more than 80 franchised locations. The company is known for its warm sandwiches, signature salads, and hand-dipped shakes.
The company's press release also contained forward-looking statements regarding the successful execution of its growth initiative and plans for future expansion. However, it acknowledged the inherent risks and uncertainties in such projections, which are subject to change based on various factors.
This news is based on a press release statement from Potbelly Corporation.
In other recent news, Potbelly Corporation has been making significant strides in its business operations. The sandwich chain reported a modest increase of 0.4% in same-store sales for Q2 2024, marking the 13th consecutive quarter of shop margin expansion. This growth was largely driven by the company's digital channels, including the Perks loyalty program, which accounted for about 40% of total shop sales. The company also added four new shops during the quarter and plans to open at least 30 more this year.
In addition to its steady growth, Potbelly announced a multi-unit development agreement to open 15 new locations in the greater Atlanta area, marking the company's first foray into Georgia. This expansion, set to commence in January 2026, is in partnership with the Royal Restaurant Group and forms a part of Potbelly's long-term growth strategy.
Despite a softer start to Q3 due to the timing of the 4th of July holiday and Hurricane Beryl, Potbelly remains optimistic about its future. The company's Q2 revenues reached $119.7 million, with a net income of $34.7 million, boosted by a tax valuation allowance release. These recent developments underscore Potbelly's commitment to growth and expansion, as the company continues to navigate through a challenging macroeconomic environment.
InvestingPro Insights
Potbelly Corporation's ambitious expansion plans are reflected in its recent market performance and financial metrics. According to InvestingPro data, the company has seen a significant return over the last week, with a 10.12% price total return, and a strong 20.91% return over the last three months. This positive momentum aligns with the company's announcement of new franchise agreements and its growth acceleration initiative.
Despite the expansion plans, Potbelly's revenue growth has been challenging, with a -2.9% decline in the last twelve months as of Q3 2024. However, the company has managed to maintain profitability, with a gross profit margin of 35.5% and an operating income margin of 2.85% over the same period.
InvestingPro Tips highlight that Potbelly is trading at a low earnings multiple, with a P/E ratio of 6.89. This could suggest that the stock is undervalued relative to its earnings, potentially making it an attractive option for value investors as the company pursues its growth strategy.
It's worth noting that while Potbelly is expanding, InvestingPro Tips also indicate that short-term obligations exceed liquid assets. This factor may be important to monitor as the company invests in its franchise-led growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Potbelly Corporation, providing deeper insights into the company's financial health and market position.
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