A lot of restaurant stocks have gone public over the past year and change. Investors have been hungry for consumer-facing companies they know, and underwriters have been chasing growing eateries to go public. The aftermath hasn't always been pretty, with many of the recent debutantes either trading below their initial IPO prices or well off their earlier peaks.
The market got a chance to check back on a pair of the forgotten restaurant newbies after the market close on Wednesday. Papa Murphy's (FRSH) and Noodles & Co. (NDLS) posted their latest financials results. They are both growing, but apparently not fast enough to please finicky investors.
Some companies just can't live up to the hype.
Making Dough Rise
Papa Murphy's is the country's largest player in the take 'n' bake pizza category. It sells gourmet pies that consumers pick up and bake at home. It watches over 1,436 mostly franchised stores, making it 20 times larger than its nearest competitor.
There's growth in this niche. Papa Murphy's experienced a 14 percent surge in revenue, fueled by expansion and a 1.5 percent uptick in comparable store sales. The growth isn't a fluke. Papa Murphy's has come through with positive comps in 36 of the past 41 quarters.
Net income on an adjusted basis nearly tripled to $1.1 million or 7 cents a share. Analysts were only holding out for 5 cents a share.
This is the pre-baked pizza chain's first full quarter as a public company, and normally the market would be eating up a company that posts better than expected results on both ends of the income statement in its first report. Yet Papa Murphy's isn't setting a lot of tongues wagging so far.
The company went public at $11 in May, settling for the low end of its initial $11 to $13 pricing range. There wasn't a lot of buzz here, and the stock closed at just $11.05 on its first day of trading. That was a good day for investors in retrospect. The stock has closed in the single digits in all but one day over the past two months.
There was a little more buzz when Noodles & Co. went public last summer. The fast casual chain specializing in pasta done up in several global-cuisine iterations was a market darling when its IPO hit the market. Noodles & Co. went public at $18, and within a few days it was peaking above $50. It's been rough after that, with the stock shedding more than half of its peak value.
Noodles & Co. wasn't as fortunate as Papa Murphy's in its latest quarter. Revenue may have moved 12 percent higher, but the growth was entirely the handiwork of expansion. Comparable restaurant sales and adjusted earnings declined for the period.
Papa Murphy's may have beaten analyst sales and profit projections, but Noodles & Co. fell short on both fronts. Investors shouldn't be surprised. This is the third consecutive quarter that it posts adjusted profits that fall short of Wall Street estimates.
Noodles & Co. did point out that comparable restaurant sales have been trending positive halfway through the current quarter, but the stock still took a hit in after-hours trading on the disappointing report. Noodles & Co. went public flying the same fast casual banner as Chipotle Mexican Grill (CMG), clearly it's nowhere close to being in the same league.
The market isn't giving up on all newbie restaurant stocks. One of last month's biggest winners was El Pollo Loco (LOCO). The California-based chain grilling up citrus-marinated chicken has more than doubled since going public at $15 three weeks ago.
The moral of the story is that you can't treat all restaurants the same. Noodles & Co. followed up its bad report on Wednesday by lowering its growth expectations. It now sees flat same-restaurant sales and earnings growth in 2014. Papa Murphy's is sticking to its earlier guidance, calling for 105 new domestic franchise store openings, comparable store sales growth of 2 percent and $830 million in system-wide sales. We're still waiting for El Pollo Loco to post its first quarterly report since last month's IPO.
No two recipes are the same, and the same can be said about the wave of restaurant stocks that recently went public.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill. Try any of our newsletter services free for 30 days.
12 Ways to Save Money on Food
Pizza and Pasta IPOs Aren't Making Investors Much Dough
This advice applies to adults and kids alike. Plan out your shopping list before you head to the grocery store so you’re not tempted by impulse buys, and let any children along for the ride know that you plan on sticking with that list. Small expenditures add up to big money, so try to avoid giving in to any last-minute requests.
If your children continue to insist that you purchase their requested items, then ask them to bring their own piggy bank money. Remind your children they are only allowed to pick something they can afford. It's good practice for grown-up budgeting.
You might not have 20 hours a week to scour multiple publications for the best deals, but if you focus on searching for online coupons, you'll end up saving just as much. Search online for products with the word "coupon" afterward. For instance, if you're looking for Cascade dish soap, search for "Cascade dish soap coupons."
To make sure that you don't waste money on impulse buys, schedule your shopping around paydays. The day or day after you get paid should be your shopping day. Before you go shopping, make a list and make sure it has everything you'll need until the next shopping day on it. Now make a commitment to yourself that you will make what you're going to purchase last until the next shopping day.
Stocking your freezer with frozen meals can help you save money on lunch, since they cost just about $5 each. It can even be a healthier option because they help you practice portion control. Just make sure you're purchasing meals that have no preservatives, and watch out for sodium levels.
Don't waste your time making a sack lunch every day. Instead, prepare a week's worth of lunches on Sunday, and your body will thank you for the extra 10 to 30 minutes of sleep you'll gain each night. If you cook one big meal on Sunday, make sure it's easy to change up throughout the week. Chicken, rice and vegetables all cook quickly and taste great with different sauces and cheeses.
Most families throw away so much food on a weekly basis. A better idea is to turn your dinner leftovers into a lunchtime feast. Apps like BigOven help you use your leftovers to make yummy, new dishes. All you have to do is enter the ingredients you have, and the app will show you different recipe options for your leftovers. You'll save money using food that would have been thrown out.
If you know you have $400 to spend per month on your food budget, that's roughly $100 a week. Whether you shop once or twice per week or use cash or credit doesn't matter as long as you stay within your spending limits. Just be sure to only spend the amount you allotted per week.
Keep your shopping list in a set location so all members of the household can access it. Write estimated prices of the items you are going to buy next to each item on the checklist. It can serve a dual purpose as a price book you can use to guess how much you will spend.
If you've ordered from the kids menu at a restaurant recently, then you know how big the meals are – they're almost as big as meals for adults, and they can cost up to $10 each. If you have multiple children, an easy way to cut down on this expense is to have them share a meal. Not only does this lower the cost of feeding everyone, but it also cuts down on food waste.
Most stores are open late, and without the distraction of announcements, people and maybe even your kids, you can have your own Zen moment. When you are clearheaded, you're more likely to zone in on what you really need and leave out what you really don't. Plus, it's easier to give the cashier coupons without causing any delays for the people in line behind you.
We are a society consumed by all sorts of apps, but if you want to grocery shop, save money and still be lazy, let Favado, an app created by Savings.com, do the work for you. The app will tell you about items on sale from different stores, and if there is a store coupon or manufacturer coupon, it will also let you know that too. (Of course, you can just use it to scan the weekly ads to keep things simple.) And if you're already glued to your smartphone, it's easy to incorporate into your shopping routine.