After consistent improvement in the past two months, Potbelly same-store sales are declining in the mid-20 percent range after seeing a nearly 70 percent drop in March.
Comp decreases improved to low single-digits at Texas and Phoenix shops as dining rooms were allowed to reopen. The performance has been driven by digital channels, Potbelly Pantry, and family deals.
To preserve cash, the sandwich chain didn’t pay rent in April and May, cut G&A expenses, and pulled back on capital expenditures. As a result, weekly cash burn has been reduced by 75 percent since early April from $2 million per week to $500,000 during the week ending May 31.
Potbelly is in ongoing discussions with landlords about permanent closures and lease restructurings. The brand said during its earnings call in May that it is considering permanently shuttering up to 100 corporate units. The potential stores were not profitable pre-COVID, and have been challenged even more amid the pandemic. CFO Steven Cirulis said around 90 percent of the units prioritized for closure have been previously impaired.
The company had $29.7 million in cash at the end of May.
“Our team continues to react proactively to the fluid environment caused by the ongoing pandemic and recent protests. We’ve been focused on streamlining costs and prioritizing cash, while driving demand and enhancing the safety of our shops,” said CEO Allan Johnson. “… We have a plan to meet the evolving needs of our customers and the new competitive environment. Although much remains uncertain, the strength of our people, our ideas, and our execution have us well-positioned to exit the pandemic from a position of strength.”
The brand ended Q1 with a 10.1 percent decrease in comps at company-run locations. Average check grew by 5.1 percent and traffic slid 14.4 percent. Total first-quarter revenue dropped from $98.1 million in 2019 to $87.6 million. Potbelly furloughed more than a third of its corporate employees and cut salaries for all executives and corporate workers by 25 percent.
