Potbelly is weighing the closure of up to 100 stores, it said Tuesday.- The locations that could come under the knife were already underperforming even before the coronavirus pandemic, executives told investors.
- The sandwich chain's losses surged in the first quarter of 2020 as it was forced to close shops, potentially upsetting turnaround efforts, and sending shares plummeting.
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Sandwich chain Potbelly said Tuesday that it is considering closing up to 100 stores, 21% of its total locations, that were underperforming even before the coronavirus crisis hit America's restaurants.
The announcement was made as part of the Chicago-based restaurant operator's first-quarter
Potbelly lost just under $17 million in the first three months of 2020, nearly four times the same period last year. Total revenues were saved slightly, falling just 10%, thanks to an uptick in deliveries which continued to accelerate in April.
Still, cost cutting is front and center, executives told investors.
"We're contemplating closing the shops, frankly, as a way to strengthen the business coming out of the crisis, shops that were not profitable pre-COVID, which, of course, during this crisis, they're even more challenged," Steven Cirulis, Potbelly's CFO, said on a conference call.
"In fact, around 90% of the shops that we prioritized in this effort for closure have been previously impaired," he continued. "So important for us from a long-term perspective. And even if you look at the shops that we've rarely closed thus far, there's a high overlap between those and those that we're contemplating closing permanently. So obviously, it helps us long term, no question, but it's also, I think as we expect and hope to be highly competitive coming out of this, it gives us some support that way as well."
Other savings were found in 25% salary reductions for all corporate employees, deferred board compensation, suspended 401(k) matching, and furloughs, the company said.
The company's been working on a turnaround since 2018, when it hired a new management team and ventured into the digital age. COVID-19 upended that.
"As the COVID situation evolved, our No. 1 priority shifted from building on our turnaround momentum to ensuring the health and safety of our employees, serving our customers and communities," CEO Alan Johnson said on the call, according to a transcript.
"While the impact of this pandemic has certainly overshadowed our progress, I believe this strategic framework put in place prior to COVID-19 will continue to positively impact the business, as customers gradually return to our shops from stay-at-home circumstances."
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