Toronto-based fast-casual chain Freshii on Wednesday night said it would stop providing earnings guidance after sales slowed down and new units opened more slowly than the company anticipated.
The result was an unbelievably ugly day: Freshii’s stock cratered by as much as 45% in morning trading Thursday before recovering slightly. It was down 26% by midmorning.
Freshii’s stock had already been falling for much of the year and has now lost two-thirds of its value in 2018. It has lost three-quarters of its value since the company’s 2017 initial public offering in Canada.
“Although we are withdrawing our outlook effective immediately, we remain excited about our business and its prospects for the future,” CEO Matthew Corrin said in a statement. “We believe that our share price does not currently reflect that value.”
The company is buying back some of its shares to boost that price. That did little to assuage investors Thursday.
Freshii’s same-store sales declined 0.8% in the quarter ended Sept. 30, a slowdown from the 5.1% growth a year earlier. The company reported a net loss of $400,000.
The company in its earnings release said that its marketing and sales efforts “have not matured on the timeline” the company anticipated and didn’t help sales in the quarter. In the process, Freshii said that assumptions it made in determining its sales outlook for the year “are no longer valid” and that it would not provide an updated same-store sales outlook right now.
Freshii is a mostly franchised system that has been aggressive in working deals to serve its food on Air Canada flights and put locations in gas stations as well as shopping malls and other more traditional areas. The company operates restaurants in the U.S. and Canada.
Most publicly traded companies provide routine guidance on revenue and earnings growth for the coming quarters so investors can get a sense of their direction.
The withdrawn outlook adds to uncertainty surrounding Freshii’s performance. It also suggests that the company’s performance is expected to worsen.
Freshii expected to grow store count to as many as 760 by the end of next year, with system sales of $285 million and same-store sales growth of 3% to 4% this and next year.
But Freshii in its earnings release said that it “continues to experience challenges in progressing franchise partners who are opening new stores through that process on the timelines anticipated by management.”
As a result, new store openings “have been slower than anticipated,” which is hurting various earnings data.
For Freshii, it’s the latest in a string of difficult news. Just more than a year ago, the company closed 18 locations inside of Target stores and lowered its expectations for store count growth.
The company appeared to generate some momentum early this year with strong same-store sales, but those sales have weakened ever since, and the stock has followed suit.
On Wednesday, the company said that it opened 18 locations in the quarter and closed eight.