Potbelly raised its same-store sales guidance for the year as investments in growth pay off.
The fast-casual sandwich shop saw company same-store sales grow 3.6% during the June 30-ended second quarter, including a 1.1% increase in traffic.
That’s despite some pressure on the lower-income consumer, said Bob Wright, Potbelly’s president and CEO, though guests with income levels below $50,000 make up only a small percentage of traffic.
“We’re able to grow the business, in spite of that pressure on the lower end that you’re hearing about from some other brands,” said Wright. “At the end of the day, people are still employed, they’re still seeing wage inflation that’s outpacing their consumer inflation. And, when it comes to lunch, fast casual still sits in a great place.”
During the quarter, Potbelly’s more-premium-priced Prime Rib Steak sandwich was added to the permanent menu, and guests loved it, said Wright.
But the chain also promoted everyday value offerings, like the Pick Your Pair meals, and $7.99 Skinny Value combo meals, which helped drive traffic.
In June, Potbelly relaunched its website and app, which is helping to grow digital channels, which made up 41% of sales during the quarter.
The chain is also rolling out a new point-of-sale system and kitchen display technology as new units open and restaurants are remodeled. Wright expects all restaurants will have the systems in place by the end of next year.
Average weekly sales increased 3.6% to $27,040, compared with $26,110 a year ago. And restaurant-level margins grew to 16.7%, up from 15.7% last year.
As a result, the company revised its guidance, saying same-store sales for the year are expected to increase between 2% and 3%. Earlier in the year, the company had projected a 1.5% to 2.5% increase. The results sent shares of Potbelly up 4% on Wednesday.
Eight sandwich shops opened during the quarter—more than the six that were expected—and the company said it is on track to see 38 openings this year, mostly franchised.
Potbelly ended the quarter with 340 company-owned and 107 franchised units, for a total of 447.
In an ongoing effort to grow Potbelly into a “franchise-focused” business, the chain began offering incentives to speed growth, with reduced fees and royalties for those who open ahead of required dates.
Potbelly added 54 more franchise commitments during the second quarter, bringing the total in development to 816, which, if all come to fruition, would put Potbelly at about 40% of Wright’s goal of reaching 2,000 units.
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