Potbelly Corporation PBPB provided an update on its business for the fourth quarter of fiscal 2024. Following the announcement, shares of the company moved up 14.7% during trading hours yesterday.

PBPB Q4 Preliminary Results

In the fourth quarter of fiscal 2024, Potbelly’s prelim results reflected same-store sales growth of 0.2-0.3%. Previously, the company anticipated comps to fall in the range of 0.5-2.5%. Potbelly's emphasis on its product innovation and digital marketing contributed positively.

During the quarter, adjusted EBITDA is expected to range from $8 million to $8.4 million, exceeding the upper end of its initial forecast of $7.0 million to $8.0 million. PBPB expects to report approximately 10% growth in adjusted EBITDA for fiscal 2024, reflecting its focus on efficiency and profitability.

Potbelly’s Store Expansion and Future Plans

During the fiscal fourth quarter, the company opened eight new shops, slightly below its anticipated range of nine to 11 new units. PBPB secured 30 additional franchise commitments, bringing the total number of open and committed locations to 727 as of Dec. 29, 2024.

The company remains focused on expanding the 2025 pipeline with additional shop openings in the coming months. The company stated that 38 new shop sites are in various stages of development, with plans to open throughout 2025.

Our Thoughts on PBPB Stock

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Shares of Potbelly gained 26.1% in the past three months against the industry’s 5.9% fall. The company has been benefiting from its digital business and unit expansion efforts. Its focus on enhancing digital engagement through its Perks loyalty program and expanding value-driven menu offerings bodes well for comps momentum. Going forward, the company remains focused on reaching 2,000 units and leveraging proprietary sauces and innovative menu items to boost brand appeal and drive growth.

Despite leveraging loyalty programs and promotions to enhance sales, Potbelly continues to operate in a challenging consumer environment marked by fluctuating spending patterns and inflationary pressures. Although franchise-driven expansion reflects progress, short-term delays in store openings highlight potential operational hurdles. Earnings estimates for fiscal 2025 have declined in the past 30 days, reflecting analysts' concerns regarding the stock growth potential.

Given PBPB’s elevated valuation, trading at a forward P/E ratio of 45.07 (compared with the industry average of 24.41) and potential operational challenges, we recommend holding the stock while avoiding fresh investments until valuation concerns ease and operational momentum accelerates further.

PBPB’s Zacks Rank & Key Picks

Potbelly currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Retail-Wholesale sector are:

Shake Shack Inc. SHAK presently carries a Zacks Rank #2 (Buy). SHAK has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has gained 84.5% in the past year. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

The Zacks Consensus Estimate for SHAK’s 2025 sales and earnings per share (EPS) indicates a rise of 14.9% and 43.3%, respectively, from the year-ago period’s levels.

Chipotle Mexican Grill, Inc. CMG presently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 9.8%, on average. The stock has surged 26.5% in the past year.

The consensus estimate for CMG’s 2025 sales and EPS indicates growth of 12.9% and 18.1%, respectively, from the year-ago period’s levels.

Brinker International, Inc. EAT presently carries a Zacks Rank #2. EAT has a trailing four-quarter earnings surprise of 12.1%, on average. The stock has surged 265.9% in the past year.

The consensus estimate for EAT’s fiscal 2025 sales and EPS indicates growth of 9.3% and 44.2%, respectively, from the year-ago period’s levels.

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