Zoe's Kitchen, Inc. (ZOES)

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ZOEShttp://www.nasdaq.com/symbol/zoesConsumer Services2014Restaurants

Latest Zoe's Kitchen, Inc. (ZOES) company news

Zoës Kitchen to Announce Fourth Quarter and Fiscal Year 2017 Results on February 22, 2018

PLANO, Texas--(BUSINESS WIRE)--

Zoe’s Kitchen, Inc. (“Zoës Kitchen”) (ZOES) today announced that it will host a conference call to discuss its fourth quarter and fiscal year 2017 financial results on Thursday, February 22, 2018 at 4:30 PM Eastern Time. A press release with fourth quarter and fiscal year 2017 financial results will be issued that same day, shortly after the market close. Hosting the conference call will be Kevin Miles, Chief Executive Officer and President, and Sunil Doshi, Chief Financial Officer.

The conference call can be accessed live over the phone by dialing 877-407-3982 or for international callers by dialing 201-493-6780. A replay will be available afterwards and can be accessed by dialing 844-512-2921 or for international callers by dialing 412-317-6671; the passcode is 13676421. The replay will be available until Thursday, March 1, 2018.

The conference call will also be webcast live from our corporate website at www.zoeskitchen.com under the investor relations section. An archive of the webcast will also be available through the corporate website shortly after the conference call has concluded.

About Zoës Kitchen

Founded in 1995, Zoës Kitchen is a fast-casual restaurant group serving a distinct menu of made-from-scratch, Mediterranean-inspired dishes delivered with warm hospitality. With no microwaves, or fryers, grilling is the predominate method of cooking along with an abundance of fresh fruits and vegetables, fresh herbs, olive oil and lean proteins. With 248 locations in 20 states across the United States, Zoës Kitchen delivers goodness to its guests by sharing simple, tasty and fresh Mediterranean meals that inspire guests to lead a balanced lifestyle and feel their best from the inside out. For more information, please visit www.zoeskitchen.com, Facebook, Twitter, Instagram, or follow #livemediterranean.

View source version on businesswire.com: http://www.businesswire.com/news/home/20180206006155/en/

For Zoe's Kitchen, Food Trends and a Face-Lift Could Turn the Tide

Mediterranean fast-casual dining chain Zoe's Kitchen (NYSE: ZOES) had a terrible 2017. The company fell victim to difficulties in the greater restaurant industry, causing results to come in lower than investors had hoped. The stock dropped dramatically as a result.

Things could start to look sunnier, though, from a combination of changing food trends and recent adjustments by management.

External influence: bad news, and maybe some good

The food industry has been struggling with the "restaurant recession" for the last two years, caused primarily by industry overexpansion. While Zoe's initially weathered the storm just fine, comparable sales succumbed to the overall trend in 2017.

View photos
A bar chart showing restaurant industry negative comparable sales for the last two years. The metric turned positive by 0.5% in the fourth quarter of 2017.

Chart by author. Data source: TDn2K.

View photos
A bar chart showing Zoe's comp sales going negative in 2017 after a 4% increase in 2016.

Chart by author. Data source: Zoe's Kitchen quarterly results.

But things have started to look up for the industry, and Zoe's specifically. The negative traffic trends are starting to subside. Zoe's, which has earned a reputation as a healthier eating-out alternative, could get an extra boost in the year ahead.

According to Amazon's Whole Foods grocery chain, healthy eating and Middle Eastern cuisine will both be big trends in the year ahead. Zoe's Kitchen fits both bills. Others in the food industry also predict this cuisine trending in 2018. With a restaurant industry that looks ready to rebound and Zoe's style of cooking in vogue, the fast-casual chain could make up some lost ground.

Internal refinements

That's not to say that Zoe's has left its fate up to the restaurant industry's health. Management has gone on the offensive, continuing to open new locations in new markets and taking steps to increase traffic at existing locations.

Its latest endeavor? A new prototype location in Raleigh, North Carolina. The exterior is modern and painted in neutral tones, and there's a reworked take on the logo with a bank of vertical lights. Inside, company CEO Kevin Miles says, the design opens up the kitchen to customers' view and has better dining room integration with patio seating, a new pickup area for carry-out orders, and warm colors and lighting to make for a more inviting space.

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The new Zoe's prototype in North Carolina.

The new Zoe's Kitchen prototype. Image source: Zoe's Kitchen.

The design will be used in new location openings, as well as remodels of existing stores. The updated format will also be paired with substantial changes made to the menu over the last few quarters, including light and healthy options from the Middle East and North Africa (like those predicted to trend higher this year).

As for the area designed around carry-out orders, convenience is something consumers have been increasingly demanding from restaurants. A new website was launched in August, and hot on its heels was an app and a loyalty rewards program. Besides helping restaurant guests track rewards, view the menu, and find locations, the app allows for online ordering and gives Zoe's more insight into customer preferences. The new website also allows ordering and gives links to third-party services that will deliver.

All these initiatives help Zoe's cater to convenience and help the stores stand out from the competition. In its last reported quarter, comparable sales had improved to only a 0.5% drop, which included a 0.9% negative hit due to Hurricanes Irma and Harvey. That would indicate a corner has potentially been turned. 

In short, Zoe's could get a double boost from industry trends and steps taken internally to rejuvenate the business. The way things look, 2018 should be a much better year than last.

More From The Motley Fool

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Nicholas Rossolillo owns shares of Zoe's Kitchen. The Motley Fool owns shares of and recommends Amazon and Zoe's Kitchen. The Motley Fool has a disclosure policy.

These 3 Trends Will Shape the Food Industry in 2018

Food, as with fashion, can be faddish. Some of those fads stick, though, and permanently alter the way we eat and the way the restaurant industry operates. A month into 2018, here are a few of those food trends that are gaining momentum.

Bring it to me

Delivery has been ubiquitous with pizza for a long time, but as Americans' schedules change and convenience becomes increasingly important, it is gaining traction with other types of food as well. Some industry studies put the number of restaurant chains testing delivery at 80%, and the number of meals delivered as a percentage of the whole restaurant industry growing in the double digits.

It has become easy for restaurants to take the trend for a spin. Available services abound, like Grubhub (NYSE: GRUB), Uber Eats, and Amazon (NASDAQ: AMZN) Restaurants, making delivery a low-risk proposition for restaurants. If the trend continues, Grubhub could be the biggest benefactor as the leader in the space. As for restaurants themselves, with delivery gaining momentum, there are no clear-cut winners, just those that could likely lose patrons if they don't offer the extra convenience.

If you want to ride the move to mobility now sweeping the restaurant industry, along with the rest of the economy, a good place to start is diversified Amazon. If you want more focused exposure, Grubhub could be the ticket. After a round of acquisitions, the company has a clear-cut lead in delivery, though its current valuation looks a little steep.

A burger, please, but hold the meat

Plant-based meat replacements, supplements, and veggies, oh my! Reasons for a move away from meat include ethics, religion, and health concerns; the end result, though, is that the number of people who have gone vegetarian or vegan has been growing by double digits.

Like the delivery trend, offering more plant-based alternatives to classic dishes is more a way to retain customers than it is a growth initiative for restaurant chains. However, one company that is doubling down on the plant-based trend is food conglomerate Nestle (NASDAQOTH: NSRGY). The company said it sees as many as 50% of consumers seeking more plant-based foods and the industry growing to $5 billion a year by 2020.

To that end, Nestle made several acquisitions and started several new business subsidiaries to take advantage of vegetarian, vegan, and plant-based food growth. Whether it involves restaurants, meal delivery services, or at-home cooking, Nestle could be a big winner if the trend continues. 

The other Middle East export

The Mediterranean diet has long been a mainstay in the world of healthful diets. Others come and go, but science has shown that the lean protein and simple unprocessed foods from Southern Europe, North Africa, and the Middle East are a sustainable yet healthy way to eat. No surprise, then, that cuisine from the Middle East and North Africa, is gaining diner interest right now.

Even Amazon's Whole Foods grocery chain sees ethnic cuisine going mainstream in 2018, so a self-fulfilling prophecy could be underway. Consumers have been imposing their desire for healthier and all-natural options onto restaurants, too, most notably helping the fast-casual dining segment (a concept that maintains the convenience of fast food but with a higher-quality menu) take off in recent years.

The outside of Zoe's Kitchen's new store in North Carolina. The building is modern minimalist, with orange lighting running up the corner of the building, and a new ZK logo at the top.

Image source: Zoe's Kitchen.

One experimenter in the space, Zoe's Kitchen (NYSE: ZOES), has been successfully opening dozens of new locations even in the midst of industry overexpansion. If interest in the ethnic food grows this year, Zoe's could get a bump. Many items on its menu pay homage to the Middle Eastern, North African, and Mediterranean categories.

There are many other fads making waves in the world of food, but delivery, plant-based food, and dishes from the Middle East are three that are developing into more than just a passing trend. Only time will tell if they stick, but businesses in a good position to capitalize on them could have a good 2018.

More From The Motley Fool

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Nicholas Rossolillo owns shares of Zoe's Kitchen. The Motley Fool owns shares of and recommends Amazon, Nestle, and Zoe's Kitchen. The Motley Fool has a disclosure policy.

2 Reasons to Buy Zoe’s Kitchen, 1 Reason to Wait

For investors in Mediterranean restaurant chain Zoe's Kitchen (NYSE: ZOES), 2017 was a terrible, horrible, no good, very bad year. The company's comparable restaurant sales (comps) -- which measure sales growth (or declines) from a restaurant's existing stores -- have been falling for the last three quarters, marking Zoe's first comps declines as a public company.

However, over the past three months, Zoe's shares have rallied more than 30% as investors appear to believe a comps recovery is on the horizon. Here are two good reasons to believe that better times are ahead for Zoe's, and one reason to be skeptical.

ZOES data by YCharts

The industry appears primed for a turnaround

The culprit for Zoe's comps declines -- and for the "restaurant recession" being experienced industrywide -- is falling consumer traffic. With a proliferation of food choices, including prepared meals from grocery stores and plenty of delivery options, consumers simply haven't been dining out as often.

View photos
A Mediterranean Salad Trio Bowl from Zoe's Kitchen

Image source: Zoe's Kitchen. 

This has led to sizable traffic declines over the past several quarters. And Zoe's has been no exception. However, according to data from TDn2K's Black Box Intelligence, the rate of decline slowed significantly in the fourth quarter and represents the best traffic result in two years for the industry.

Time period

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Restaurant industry traffic growth (decline)

(3.4%)

(4.5%)

(3.6%)

(3.1%)

(4.1%)

(1.9%)

Zoe's traffic growth (decline)

(0.5%)

(2.4%)

(4.6%)

(5%)

(2.3%)

?

Data source: TDn2K's Black Box Intelligence, Zoe's Kitchen earnings releases.

That improvement helped the restaurant industry post its first quarter of comps growth in two years as well, with same-store sales growing 0.4% in Q4.

Time period

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Restaurant industry comps growth (decline)

(1%)

(2.4%)

(1.6%)

(1%)

(2.2%)

0.4%

Zoe's comps growth (decline)

2.4%

0.7%

(3.3%)

(3.8%)

(0.5%)

?

Data source: TDn2K's Black Box Intelligence, Zoe's Kitchen earnings releases.

With the industry finally trending upwards again, Zoe's looks as if it may enjoy a recovery, too.

Zoe's comps were already showing signs of life last quarter

In 2017, Zoe's suffered worse comps declines than the industry during Q1 and Q2, but had a much better Q3 (relatively speaking) -- outperforming the industry by 1.7%. Moreover, that result included the significant sales impacts from Hurricanes Harvey and Irma. According to Zoe's estimates, excluding the effects of those storms, comps might have actually increased by 0.4% during Q3.

What's driving this turnaround in the making? The company believes the new menu it rolled out last year has been particularly effective at driving more customers to its stores. The data seem to back up this assertion, as the company went from underperforming industry traffic numbers in Q2 to beating them handily in Q3.

Zoe's won't report its Q4 2017 earnings until February, but when it does, a return to positive comps doesn't seem at all far-fetched. And if the company can manage to hold its margins steady this year as well, 2018 may turn out to be a much better year for Zoe's investors.

However, one quarter does not make a trend

For more cautious investors, a wait-and-see approach may make more sense. Though both the industry and Zoe's appear to be showing underlying signs of improvement, a sustained recovery looks far from certain at this point.

That's especially true since the root cause of the industry's comps struggles -- falling customer traffic -- hasn't gone away. With traffic continuing to decline year over year, the recent uptick in comps is being driven entirely by a rise in the average guest check. That's obviously not a sustainable formula, and until customer traffic begins to rise again, any comps uptick is likely to be temporary.

Looking at the restaurant industry's recent results, TDn2K executive director Victor Fernandez cautioned against getting too optimistic:

Although it is great to see the industry move away from the recurring story of declining same-store sales, we also must keep things in perspective. ... December of 2016 had very soft same-store sales and traffic results, so lapping over those results didn't pose much of a challenge. Over a longer view, same-store sales declined by 2.0 percent during the fourth quarter of 2017 when compared with that same quarter in 2015. Furthermore, the trend of declining guest traffic continues to plague the industry and is one that seems unlikely to reverse any time soon .

Until that traffic headwind abates, investors may want to wait for a clearer indication that the company's prospects are improving before jumping in. At a recent conference appearance on Jan. 9, Zoe's management didn't drop any discernible hints about its Q4 comps or traffic numbers, so investors will have to wait for Zoe's next earnings report for the official word.

More From The Motley Fool

Andy Gould owns shares of Zoe's Kitchen and has the following options: short January 2018 $30 puts on Zoe's Kitchen and long January 2018 $30 calls on Zoe's Kitchen. The Motley Fool owns shares of and recommends Zoe's Kitchen. The Motley Fool has a disclosure policy.

What Investors Want to See From Zoe’s Kitchen in 2018

To say last year was ugly for Zoe's Kitchen (NYSE: ZOES) is an understatement. The Mediterranean-restaurant chain suffered three consecutive quarters of comparable restaurant sales declines -- its first negative comps performances since its IPO -- culminating in a quarter where hurricanes Harvey and Irma wreaked havoc on about a third of Zoe's locations, which are concentrated in the Southeast U.S. and Texas.

Not surprisingly, Zoe's stock finished 2017 down about 30% (though it has recovered fairly substantially over the last couple of months). As the company looks ahead to a new year, here's a rundown of the things investors will be watching for.

ZOES data by YCharts

A comps recovery is top on the list

Zoe's comps woes are the result of falling customer traffic -- a problem that's been plaguing many players in the industry for the last couple of years as the number of restaurant choices continues to increase. Zoe's has been trying a variety of tactics to get more people in the door. And while none has been a silver bullet, early signs have been generally positive.

First, the company revamped its menu in the middle of last year, introducing a new line of bowls, sandwiches, and sauces that feature on-trend ingredients like lamb and cauliflower, as well as grab-and-go snack boxes. On its last conference call, the company noted that the new menu items were performing better than anticipated, with some of them among Zoe's top 10 in terms of sales.

Zoe's also completely redesigned its website and mobile app, which now allow online orders for catering, resulting in strong sequential online sales gains versus prior quarters.

Finally, the company ramped up its digital loyalty program, growing its member base by 20% in two months after launching its new site. As of its last conference call, the company had just begun testing various offers to different customer segments to generate more repeat traffic.

All these things appear to be helping at least somewhat. Zoe's comps decline was just 0.5% in Q3, compared to a decline of 3.8% in the prior quarter. The company maintains that excluding the effects of the hurricanes in Q3, comps would have actually turned positive again. If the company can carry that momentum into Q4, a return to positive comps will be music to investors' ears.

View photos
A picture of Zoe's Kitchen lamb pita sandwich.

Zoe's Kitchen lamb pita sandwich. Image source: Zoe's Kitchen.

Stabilizing restaurant margins would be a bonus

Zoe's has historically posted restaurant-level profit margins -- which are the store-level profits before corporate-level costs are deducted -- of 20% and higher. But as wages keep rising, higher labor costs (another headwind for the industry at large) are hitting Zoe's, too. In Q3, Zoe's restaurant margin declined to 18.8%, and for full-year 2017, Zoe's expects a margin in the 18.3% to 18.5% range, down from 20% in 2016.

Some moderate relief may be on the way, however. With comps and margins both under pressure recently, Zoe's is pulling back a bit on its pace of new store openings in 2018. The company plans to open 25 stores this year, which means it will be expanding its store base by just 10% compared to the 20% rates of the recent past.

During their first two years of operation, new stores are generally less efficient and ring up lower sales on average than mature stores. So Zoe's plans for reduced store growth should eventually result in fewer new stores putting an extra drag on margins -- though CFO Sunil Doshi believes any benefit will be modest.

Cash flow positivity would be a milestone

The other implication of Zoe's planned slowdown in store growth lies on the cash flow side. The company had been relying on debt to fund its expansion in 2017. But with Zoe's now opening fewer stores in 2018, the company expects its capital expenditures to come down to a level that's roughly in line with its operating cash flow, which should eliminate the need for any additional debt this year.

ZOES Free Cash Flow (Annual) data by YCharts

Doshi stated on the last conference call that if -- and it's a big "if" -- Zoe's can achieve low single-digit comps in 2018, the company could become free-cash-flow positive for the first time. That would mark a big inflection point, providing some measure of comfort for investors concerned about last year's nasty combination of declining comps, shrinking margins, and rising debt.

More From The Motley Fool

Andy Gould owns shares of Zoe's Kitchen. The Motley Fool owns shares of and recommends Zoe's Kitchen. The Motley Fool has a disclosure policy.

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