Noodles & Company Earnings Call: Mixed Sentiment Amidst Strategic Changes

Noodles & Company ((NDLS)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Noodles & Company painted a mixed picture, balancing positive strides in sales and guest satisfaction with challenges in revenue and profitability. While the company has made significant improvements in strategic areas, it faces hurdles that have tempered overall sentiment.

Improvement in Sales and Traffic

The company reported a modest increase in fourth-quarter system-wide comparable sales by 0.8%, with traffic remaining nearly flat. However, the first quarter of 2025 has shown more promising results, with over 3% comp sales growth and positive traffic, indicating a potential upward trend.

Guest Satisfaction Increases

January marked a significant achievement for Noodles & Company, with the largest single-month increase in overall guest satisfaction. This improvement has narrowed the gap to the fast-casual industry average by nearly 80% over the past year, reflecting the company’s efforts to enhance the customer experience.

Menu Transformation Success

The introduction of new menu items, such as Steak Stroganoff, has been a success, driving sales trends positively. The company anticipates further improvements with additional menu items set to launch in March, showcasing its commitment to menu innovation.

Leadership Strengthening

Noodles & Company has bolstered its leadership team with the appointment of Joe Cristina as President and COO. This move is part of broader leadership changes, including a new Chief Concept Officer and Executive Vice President of Marketing, aimed at steering the company towards growth.

Decreased Revenue and Profitability

Despite positive developments, the company faced a 2% decrease in total revenue, amounting to $121.8 million in the fourth quarter. Additionally, the restaurant-level contribution margin fell from 14.7% to 11.2%, highlighting challenges in maintaining profitability.

Increased Costs

The company experienced increased costs, with cost of sales rising by 180 basis points and labor costs by 30 basis points. These increases were attributed to traffic deleverage and discounting, impacting the overall cost structure.

Restaurant Closures

In a bid to optimize its portfolio, Noodles & Company closed six company-owned and three franchise restaurants in the fourth quarter. Further closures are planned for 2025, reflecting a strategic review of its restaurant locations.

Net Loss

The company reported a net loss of $9.7 million or $0.21 per diluted share for the fourth quarter, compared to a net loss of $6.1 million or $0.14 per diluted share last year. This increase in net loss underscores the financial challenges faced by the company.

Forward-Looking Guidance

Looking ahead, Noodles & Company anticipates a transformative year in 2025, with projected total revenue between $503 million and $512 million and mid-single-digit comparable restaurant sales growth. The company plans to open two new company-owned restaurants while closing 12 to 15 company-owned and four franchise restaurants. Capital expenditures are expected to be significantly lower, allowing for potential debt reduction.

In summary, the earnings call for Noodles & Company highlighted a balanced sentiment, with positive developments in sales and guest satisfaction offset by challenges in revenue and profitability. The company is poised for a transformative year ahead, with strategic initiatives aimed at driving growth and optimizing its operations.