Struggling sandwich chain Potbelly Corp., which last week said it might be forced to permanently close up to 100 stores, warned investors Monday that it may not be able to survive the year.
The Chicago-based fast casual included a going concern warning in its quarterly report, filed with the Securities and Exchange Commission, noting it is “probable” that it will not be in compliance with certain credit agreements due to the effects of the coronavirus on its business.
“The probable inability of the Company to meet its current covenant requirements raises substantial doubt on the Company’s ability to meet its obligations within one year from the financial statement issuance date and to continue as a going concern,” the company said in the filing.
Potbelly said it is currently in negotiations with its lender and expects to make further amendments to its credit agreement.
The chain drew down nearly $40 million in credit in mid-March and amended its credit agreement last week to change the loan’s maturity date from July 31, 2022, to March 31, 2022, according to the filing. Potbelly repaid $15 million, with the option to reborrow the money when its cash balance falls below $28 million. The company must pay a 1% fee on its loan balance, following the credit amendment.
The 473-unit brand had 52 temporarily closed units, according to its filing, an increase from the 36 temporary closures noted by the chain last week. Those stores and others that were underperforming before the pandemic could be destined for permanent closure, the company said.
Potbelly’s same-store sales plunged nearly 70% early in the coronavirus crisis, and have since rebounded to minus 45%.