Noodles shares plunge on flat sales and a cut outlook as certain markets still pose challenges

Markets Associated Press

Shares of Noodles & Co. plunged Friday after the company reported disappointing second-quarter results and cut its outlook for the year as it faces flat overall sales and weakness in new markets.

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The stock fell $2.50, or 16.5 percent, to $12.64 in midday trading.

The restaurant chain said its profit fell 13 percent to just under $3.1 million, mainly on higher costs, despite a 16 percent boost to $115.2 million in overall revenue. Those results still fell shy of Wall Street expectations.

A key measure of the Broomfield, Colorado, company's sales health, same-store sales, remained flat and it cut its adjusted profit outlook for the year to between 26 cents and 32 cents per share from guidance of 38 cents per share.

The company blamed part of the slide on lower volumes on a higher mix of "immature restaurants" and labor pressure. The company has been struggling in certain markets, including its home territory of Colorado. Washington, D.C., and Austin, Texas have also posed challenges for the company over the last several quarters.

Jefferies analyst Andy Barish reaffirmed his "Buy" rating on the company, saying the weaker markets still saw improvement during the past several quarters and the biggest driver to recovery will likely be an upcoming advertising effort by the company.

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Meanwhile, Stifel analyst Paul Westra reaffirmed a "Hold" rating, also citing the company's strategy to improve performance, including the upcoming advertising campaign.