Potbelly Corp. appears to have stepped back from the precipice of bankruptcy, according to promising second-quarter earnings released late Wednesday.
The Chicago-based sandwich chain, which issued a going concern warning in May after saying it might be forced to close up to 100 units, now says it has resolved those issues and that the number of potential permanent closures has been slashed in half.
Potbelly’s stock surged as much as 23% during in mid-morning trading Thursday.
As of early August, Potbelly had closed 16 restaurants permanently and has renegotiated 187 leases. The company had 424 company-operated stores and 44 franchised shops for the quarter ended June 28.
The chain, which hired former Wendy’s executive Robert Wright as its new president and CEO last month, is not out of the woods yet: Same-store sales for the second quarter remained down 41.5%, though that is up from a March low of negative 68% at the start of the pandemic. It is reporting a same-store sales drop in the “mid -20% range” throughout June.
Potbelly is currently seeing its suburban shops outperform urban locations, with some bright spots coming from a family-meal offering that is generating dinner business.
“It has provided us with relevancy in a daypart where Potbelly traditionally hadn’t had relevancy,” Wright told analysts. “It puts us in company with pizza and wings.”
Potbelly’s digital sales nearly tripled quarter-over-quarter to 46% of total sales. And the company said its cash burn rate has fallen 65% since the start of the pandemic. Stores have been cash-flow positive since the end of May, with $29.1 million in cash on hand systemwide.
Another bright spot for the chain has been the relaunch of its loyalty program, which saw a 53% increase in membership quarter-over-quarter.
Potbelly reported total revenue of $56.2 million, down from $105.6 million during the same period last year.
“I look forward to leading Potbelly on the next leg of this turnaround,” Wright said.