Latest Zoe's Kitchen, Inc. (ZOES) company news
I just can't seem to get off the topic of restaurants, but with good reason; there's a lot happening within the sector.
We found out yesterday that the party was not quite over for Bob Evans Farms Inc. (BOBE) , which sold its restaurant business earlier this year to Golden Gate Capital for $565 million and bought a potato company. Both moves were designed to help it focus on its prepared food business. Once those deals were done, it paid a special $7.50 dividend to shareholders; those who had been in the stock over the past year saw it more than double over that time frame. It was a special situation that paid off handsomely.
I, for one, was pleased with the outcome. I thought valuations of the new BOBE were getting a bit stretched and closed the position in late June in the $72 range. From there, the stock gave back 10 points by late August, then regained steam. Yesterday, Post Holdings Inc. (POST) agreed to acquire Bob Evans for $77 a share, or about $1.5 billion; hats off to shareholders who hung on for that last bit of payoff. I certainly did not see that coming.
Elsewhere, Mediterranean fast casual name Zoe's Kitchen Inc. (ZOES) , which has fallen back to earth over the past couple years as the growth crowd became inpatient, announced yesterday after market close that chief operating officer Jeremy Hartley, age 57, will be leaving the company next month to "focus on personal interests." It is unclear what this means for ZOES or why exactly Hartley is exiting, but it has been a rough run for the company, which is trying to make its mark, grow, and achieve sustainable profitability in a crowded and difficult restaurant environment.
Last but not least, DineEquity Inc. (DIN) , purveyor of Applebee's and IHOP, is starting to look intriguing. Down nearly 50% year to date and out of favor, it is one of the cheapest restaurant names available. DineEquity is trading at just under nine times next year's consensus earnings estimates, its dividend yields a whopping 9.8% and it has been buying back stock. The market clearly is questioning the sustainability of that dividend and the company is more leveraged than I typically like to see, with $1.4 billion in debt. However, it is also highly profitable, with net profit margins in excess of 15% last year. Higher margins are one of the benefits of franchising; indeed, the company owns just a handful of the restaurants under its banner.
Buying the cheapest names in a troubled sector does not guarantee success, but this one may be worth a look and is on my radar.
PLANO, Texas--(BUSINESS WIRE)--
ZOES), a fast-casual Mediterranean restaurant group, today announced the departure of Chief Operating Officer, Jeremy Hartley, effective Monday, October 23, 2017. Hartley is leaving the company to focus on personal interests." data-reactid="12">Zoës Kitchen (ZOES), a fast-casual Mediterranean restaurant group, today announced the departure of Chief Operating Officer, Jeremy Hartley, effective Monday, October 23, 2017. Hartley is leaving the company to focus on personal interests.
“We thank Jeremy for his work and contributions over the last four years and express our heartfelt appreciation for his commitment to growing the Zoës Kitchen brand. He has built a strong leadership team devoted to operational excellence that will continue to provide our guests with a differentiated dining experience. We wish Jeremy and his family all the best,” said Kevin Miles, CEO and President, Zoës Kitchen.
Hartley joined Zoës Kitchen in 2013 and during his tenure he helped lead the company through a successful IPO, and the opening of more than 100 restaurant locations. He built a dedicated operational team with an emphasis on the company’s brand promise, core values and culture.
“It’s been a privilege and an honor to see Zoës Kitchen through much growth and I’m profoundly grateful to have participated in the company’s success story,” said Hartley. “I leave Zoës with fond memories, great friends and colleagues and as a fan of this unique brand," he added.
About Zoës Kitchen
www.zoeskitchen.com, Facebook, Instagram, Twitter or follow #LiveMed." data-reactid="17">Founded in 1995, Zoës Kitchen is a fast-casual restaurant group serving a distinct menu of fresh, wholesome, 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 235 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, Instagram, Twitter or follow #LiveMed.
View source version on businesswire.com:" data-reactid="19">
Shares of Zoe's Kitchen (NYSE:ZOES) popped nearly 14% last month, according to data provided by S&P Global Market Intelligence. The Mediterranean-inspired restaurant chain's stock received a boost from better-than-expected second-quarter results and an analyst upgrade.
Zoe's popped 9% ahead of its second-quarter report when Telsey Advisor Group upgraded its stock to outperform from market perform. It then held onto most of those gains after it delivered Q2 earnings per share of $0.03, while Wall Street was only expecting a breakeven quarter. Zoe's $74.3 million in revenue, however, came in below analysts' estimates of $77.7 million.
Zoe's also said that it remains on track to hit its full-year financial targets. The company still expects comparable-restaurant sales growth of flat to down 3%, despite a 3.8% decline in comps in the second quarter. Management also reiterated its guidance for revenue of $314 million-$322 million, restaurant contribution margin of 18.3%-19%, and 38-40 new restaurant openings. Zoe's did, however, say that it plans to "moderate" its store count expansion to 25-30 restaurants in 2018.
Despite its double-digit climb in August, Zoe's stock price is still down nearly 50% in 2017 following a brutal first half. Last month's move seems like a relief rally, with investors likely comforted by the restaurant chain's decision to not cut its outlook again like it did in the first-quarter.
Yet I find Zoe's announcement that it would be slowing its pace of new restaurant openings in 2018 to be troubling, as it's now unlikely that it will hit its long-term expansion targets. It also suggests that new locations may be cannibalizing the sales of Zoe's existing restaurants. Both of which would make the stock far less interesting to growth investors, and could make its August rally only a temporary reprieve before a renewed move downwards. As such, investors may wish to remain cautious when considering an investment in Zoe's Kitchen, and perhaps wait for evidence that its key operating metrics are stabilizing before initiating or adding to a position in the company.
Major restaurant chains are dealing with a crushing blow after severe hurricanes hit the United States. Around 13,000 restaurants that are part of a publicly traded chain were in hurricane-exposed areas, according to Credit Suisse. Yahoo Finance’s Alexis Christoforous, Rick Newman and Justine Underhill figure out what the long-term problems will be.
When I was asked to write this column identifying my five favorite stocks for September and the rest of the year, I admit that I cringed. My favorite stock are often among other investors' least favorite ones, and they usually take a lot longer to play out positively than most people can stomach (if indeed my picks play out favorably at all).
This column easily could be titled the "best of the worst," and these ideas aren't meant as core holdings. Rather, they're "satellite" holdings for the bravest of investors -- or the most foolish, depending on your point of view.
With that in mind, I like:
FIT has been trounced -- down nearly 60% over the past year and 87% from its all-time high. Briefly a cult stock as wearables became the "next new thing," growth investors have fled Fitbit as its revenue and prospects dimmed.
As a value investor, I don't always step into such situations, but this one seems interesting. While I don't expect FIT to be a $50 stock again any time soon, it's compelling at just over two times net current asset value. The company also has no debt and $676 million in cash. That's nearly $3 a share, as well as roughly half FIT's market cap.
Now, cash can admittedly be fleeting when a company is operating in the red. But while Fitbit's market share has been falling, recent earnings haven't been as bad as expected. It also remains to be seen whether Fitbit's recently unveiled smart watch will bear fruit. Put it all together and you have a hot mess that most investors are shunning ... but that deep-value investors like myself are willing to consider.
FreightCar America Inc. (RAIL)
This name is the only one of the five stocks in this column that's in positive territory, up some 23% year to date. Still, it remains cheap at just 1.36 times net current asset value.
Earnings appear to be turning around (with positive surprises during the past two quarters), and RAIL might return to profitability in 2018. Meanwhile, the balance sheet remains stellar, with no debt and $132 million (or $10.76 per share) in cash and short-term investments. FreigthCar America also yields 2% and looks like a potential acquisition target.
Sporting-goods retailing HIBB is in an ugly business and is likely continue to struggle. But the question is whether the punishment this stock has received (down some 67% year to date) fits the crime.
Make no mistake, Hibbett deserved a haircut because its same-store sales are plunging, but I believe things went too far. After all, HIBB is trading at just 1.2 times net current asset value and 0.77 times tangible book value per share, and management has continued to buy back shares.
Hibbett might not be a long-term play for me as I'm skeptical of retail in general -- but as ugly as the stock is, I'll buy a dollar bill for 50 cents as often as possible.
These are some hot Nike (NKE) styles.
I'm not a big fan of restaurant stocks, but ZOES is one of a couple of names that look interesting. I've been watching this stock since its 2014 initial public offering, but was always wary of its price.
However, Zoe's has lost some 46% year to date as growth investors grew impatient, so I recently took a position in it. I don't expect quick results here, and Zoe's will likely be hurt by Hurricane Harvey given the firm's significant presence in Houston. Still, the rest of 2017 might provide a decent entry point for long-term investors.
Last but not least is the hugely disappointing Biglari Holdings, which is down some 37% year to date.
Among other interests, Biglari owns the Steak 'n Shake restaurant chain and about 20% of Cracker Barrel Old Country Store Inc. (CBRL) . However, the stock has always traded at a discount -- in my view mainly because of a convoluted ownership structure, investor distrust of management and a limited float.
Still, I think the current discount has gotten extreme, and it wouldn't surprise me if the company began buying back stock at these levels. In a 2015 tender offer, the company purchased more than 620,000 shares at $420 apiece -- an offer I rejected as I thought at the time that it was too cheap. But shares now trade in the $300 range, a six-year low.
(Editor's pick. This article originally appeared on Sept. 1 on Real Money, our premium site for active traders. Click here to get great columns like this from Jonathan Heller, Jim Cramer and other writers even earlier in the trading day.)
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