Jersey Mike’s Earnings Beat Doesn’t End the Stock’s Post-IPO Slump

Jersey Mike’s reported better-than-expected third-quarter earnings. (Dreamstime)

Key Points

Jersey Mike’s reports third-quarter revenue of $209 million and adjusted earnings of 23 cents a share, beating Wall Street expectations.
The sandwich chain’s same-store sales grow 3%, coming in at the low end of forecasts.
Jersey Mike’s announces plans to return up to $200 million to shareholders through a stock buyback program and a special dividend.

Jersey Mike’s Subs reported better-than-expected third-quarter earnings and announced plans to return up to $200 million to shareholders on Wednesday. That wasn’t enough to revive shares of the sandwich chain, which have struggled since their trading debut in July.

Shares of Jersey Mike’s fell 2.7% to $16.50 in premarket trading on Wednesday. The stock has dropped 22% through Tuesday since opening at $21 on July 30.

For the fiscal third quarter, Jersey Mike’s reported $209 million in revenue and adjusted earnings of 23 cents a share. Wall Street anticipated $208.5 million in revenue and adjusted earnings of 16 cents, according to FactSet.

Systemwide sales, which include sales at franchised and company-operated restaurants, grew 11% year over year to $1.2 billion.

Same-store sales grew 3%, accelerating from 2.3% growth in the prior quarter. The result came in at the low end of the company’s forecast of 3% to 4% growth and below consensus calls for 3.4%.

Jersey Mike’s also announced plans to return up to $200 million to shareholders, including a $100 million share repurchase program and a special dividend of 35 cents a share.

The company maintained its full-year forecast for adjusted Ebitda of at least 20%, along with net restaurant growth of at least 8%. It now expects same-store sales growth of at least 2.5%, compared with a prior forecast of 2.5% to 3%.

The sandwich chain opened 80 new restaurants during the third quarter, up from 54 a year earlier, bringing its total footprint to 3,456 locations.

Jersey Mike’s shares has been under pressure since sliding 6% in their first session, closing below the $23 initial pubic offering price as investor enthusiasm for restaurant stocks waned following broader concerns about consumer spending.

The company went public with a multibillion-dollar valuation, buoyed by its position as the second-largest sandwich chain in the U.S. behind Subway. But its stock has struggled to gain traction as investors weigh the company’s growth prospects against a challenging environment for restaurant operators.

Write to Ty Roush at tyler.roush@barrons.com

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