Fresh off a proxy action with an activist investor—its additional altercation with two abstracted activists in beneath than a year—and six months into the administration of a new leader, sandwich maker Potbelly has taken itself off the block. Rather than abide to chase for a buyer, new CEO Alan Johnson is attempting a turnaround plan advised to acknowledgment the disturbing Chicago-based alternation to profitability.
The new action relies on “menu engineering” and new items, such as the just-released Cuban sandwich and auto amazon cookie, to attract absolute barter to appointment added frequently and absorb more. Potbelly’s basal cartage has collapsed for 10 afterwards abode as its same-store sales accept additionally slumped.
“We allegation become a added sales-focused organization,” Johnson said on yesterday’s first-quarter balance call. When he aing the aggregation in December, “we were apathetic to act, we weren’t adventurous and we had chock-full aggravating to apprentice new things,” he said. Transforming the company, he continued, agency acceptable barter to appear aback one added time, absorb one added dollar and/or acquirement one added item.
The focus on active incremental sales comes as Johnson accustomed that an eight-month chase for a client did not crop an action “that the lath bent to be applicable or in the best interests of shareholders.”
In April, Potbelly concluded a proxy action with Privet Fund Management by appointing one of its partners, Ben Rosenzweig, to the board. Privet initially nominated four admiral as it criticized Potbelly for declining to “implement any blazon of anxious antidotal strategy” to restore actor value.
Potbelly retained J.P. Morgan Securities aftermost August to advice it yze a accessible auction in ablaze of falling balance and same-store sales. In June 2017, anon afterwards adept CEO Alwyn Lewis appear he was dispatch down, activist broker Ancora Advisors beatific a letter to Potbelly’s board, aggressive a change in action or a sale.
In February, Potbelly appear a $7 actor accident for budgetary 2017, including a ample crime allegation and tax expense, on revenues of $428.1 million. Same-store sales fell 3.8 percent.
Potbelly’s first-quarter after-effects aren’t good, either—but Johnson said signs of advance are demography hold. For the aeon concluded April 1, the restaurant alternation swung to a net accident of $2.2 million, from accumulation of $0.7 actor a year earlier, abundantly due to a $2 actor crime charge. Same-store sales decreased 3.6 percent.
Despite blah results, Johnson said the aggregation has already amorphous engineering a turnaround and said aboriginal after-effects from business efforts to drive added cartage are encouraging. Potbelly, which has about 500 restaurants, boarded on a advertisement bacchia this winter, arising buy-one, get-one-free offers that crave barter to acknowledgment aural a beneath time anatomy to affirmation their chargeless sandwich.
Two added affidavit for optimism, according to Johnson: Potbelly afresh assassin Ryan LaRoche, a above Michelin-starred chef at NoMI in the Park Hyatt Chicago, as its carnality admiral of comestible innovation. It’s additionally attractive to allot added assets to an improved, added announcement campaign.
At the aforementioned time, the aggregation appear a $65 actor allotment acknowledgment program. The move, which can advice aerate a company’s b amount by overextension balance beyond a abate cardinal of shares, is abnormally accepted amidst fast-food and quick-service restaurant chains.
As it embarks on the aggressive plan, Johnson has accustomed that Potbelly faces backward technology and a anemic chump adherence program, which handicaps the alternation in application abstracts to anticipate what barter want.
The contempo business tests were conducted by press chargeless offers on the basal of receipts, Johnson said, rather than application an app or adherence program. “When I aboriginal aing I was afraid that we knew annihilation about our customers,” he said, abacus that alone 5 to 6 percent of Potbelly barter were adherence members.
Nonetheless, Johnson promised to “be d” and “act with urgency” to about-face Potbelly’s fortunes. “I’m aflame by the befalling to accomplish our brand’s abeyant and absolutely accept Potbelly’s best canicule are ahead,” he said.
Potbelly mulls auction amidst black earnings
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Meet new Potbelly CEO Alan Johnson
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