Potbelly puts pandemic in rearview mirror

Central business district units and catering sales have almost returned to pre-Covid levels on "traffic-driven tailwinds."
Potbelly sign
The 429-unit chain includes about 45 franchised locations./Photograph:Shutterstock.

Potbelly’s average unit volumes hit new records in 2022 as locations in central business districts neared pre-pandemic levels in the fourth quarter, the company said Thursday.

Weekly average unit volumes also reached a record $24,144 in the fourth quarter, marking steady improvement as company pushes toward its goal of annual AUVs surpassing $1.3 million.

The Chicago-based sandwich chain's AUV for the year was $1.16 million, exceeding the high end of earlier guidance.  For fiscal 2023, the chain pledged to reach “record" AUVs. President and CEO Bob Wright said he expects 2023 to be a year of further acceleration.

"We believe Q1 2023 will be our fourth consecutive quarter not materially impacted by COVID-19 or its Omicron variant," he said.

Potbelly recorded same-store sales growth of 18.5% for the year and nearly 19% for the fourth quarter alone. And unlike most chains, which are seeing comp growth as a result of menu price hikes, Potbelly credited a “traffic driven tailwind” as office workers returned to central business districts and airports, and catering sales continue to recover.

Digital marketing efforts also helped, including a refined loyalty program.

Wright said digital-only promotions, like National Cookie Day and the Week of Perks helped drive the percentage of sales from digital channels to 38%, which significantly contributed to top line sales—though limited-time offers featuring a new pastrami sandwich and egg nog shake also performed well.

Potbelly is also attempting to light a fire under franchise growth. The chain currently has agreements for 51 new shops over the next 7-8 years, and Wright has a goal of reaching 2,000 units long term, primarily franchised.

“Despite the economic pressure on small business, including climbing interest rates, we’re very pleased with the momentum towards becoming a primarily franchise-focused organization,” said Wright.

For the Dec. 25-ended quarter, revenues increased 17% to $120.2 million. Net income was $2.7 million, or 9 cents per share, compared with a loss of $2.5 million, or loss of 9 cents per share, a year ago. It was the third consecutive quarter of profitability.

For the year, net income swung positive to $4.7 million, or 15 cents per share, compared with a loss of $23.6 million, or a loss of 86 cents per share. Total revenues for the year were up by 19% to $452 million, an all-time record for the chain.

UPDATE: This article has been updated with more information from Potbelly and to correct an average unit volume.

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