Noodles & Company’s comprehensive menu overhaul in March is already showing results.
The fast-casual chain on Wednesday reported a systemwide same-store sales increase of 4.4% for the April 1-ended first quarter, including a 1.8% increase in traffic.
And that trend continued into April, when same-store sales were up 5%, despite the challenging economic environment, said Drew Madsen, CEO of the Broomfield, Colorado-based chain.
“Both Q1 and April results represent a significant acceleration from Q4 last year, when traffic was down minus 0.1% and same-store sales grew 0.5%,” Madsen said. “This sustained and significant improvement in our sales trends demonstrates to us that the execution of our previously announced strategic priorities have gained traction, especially while coming during a period when the industry has been impacted by lower consumer sentiment.”
Sales of the new mac and cheese dishes have exceeded expectations, Madsen said. The mac and cheese line included offerings topped with Buffalo Chicken Ranch, Garlic Bacon Crunch and pulled pork barbecue, for example.
“All the mac and cheese dishes are selling much better than they did in the test market,” he said. “Cajun Shrimp Fettuccine [is] selling better, Rigatoni Rosa is selling better. And it’s telling us that we are really saying something that guests are resonating with and paying attention to and acting on.”
The menu overhaul has been in the works for about two years with the help of consulting firm The Culinary Edge. Last year, three new dishes debuted to test the waters.
But a more comprehensive overhaul rolled out in March, with nine dishes—five new offerings and four reworked classics. The overhaul has reached about two thirds of the menu, and has included other touches, like the use of ceramic tableware for dine-in and new team member uniforms.
Noodle’s new menu has been accompanied by a marketing campaign that aims to reclaim the brand’s pasta expertise with the tagline “We know noodles.”
Madsen said the marketing and public relations campaigns have resulted in double-digit increases in brand awareness, brand search traffic and app sessions on the chain’s platforms for both new and existing customers.
“We have definitely created more interest in our brand,” he said.
The menu overhaul, however, was expensive.
Total revenue grew 2% to $123.8 million for the quarter. But the company’s net loss grew to $9.1 million, compared with $6.1 million a year ago.
Some of that quarterly loss was attributed to one-time costs. For example, the menu overhaul was preceded by a four-week training period that started with regional directors and cascaded down to hourly staffers to ensure the new dishes were executed well.
Madsen said reductions in capital spending and smart cost-saving efforts will strengthen the balance sheet through the year and allow for the reduction of debt in the second half.
Last year, cost reduction efforts trimmed expenditures by about $5 million, and a similar amount is expected for 2025.
The company reiterated projections of a mid-single digit increase in same-store sales for the year, but widened the low end of restaurant margin expectations to between 12% to 14% (previously 12.5% to 14%), saying tariffs could have an impact on produce sourced from South America and shrimp from Asia.
“Overall, we are confident in the foundation we have put in place and excited by our sales momentum to start 2025,” Madsen said.
As noted earlier, Noodles, however, still plans to shutter between 13 and 17 underperforming company-owned restaurants this year, along with four franchised units. Two new company-owned units are expected to open in 2025. The chain ended the quarter with 369 company-owned and 91 franchised units.
Despite the overall positive results, Wall Street appeared to be disappointed.
Earlier this year, Noodles faced the threat of being delisted from the Nasdaq Global Select Market because the stock price had dipped too low for too long. Though more recently the stock price had improved, on Wednesday Noodles’ stock was down nearly 5% after hours, again dipping below the $1 per share threshold.
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