This has been a decent year for consumer-facing companies, and restaurant stocks would seem to be obvious beneficiaries. The employment picture is improving, giving consumers the means to eat out. Lower gas prices are also helping.
However, not all eatery chains moved higher in 2014. Let’s take a look at some of the companies that went the wrong way this year.
Potbelly (PBPB) — Down 51 percent this year
The sandwich baker that got its start as part of an antique store has shed more than half of its value. It’s been rough for the stock that initially soared after going public last year. Then again, investors have a right to question Potbelly’s popularity.
Comparable-restaurant sales through the first nine months of this year have declined 1.1 percent, and adjusted profitability has been nearly cut in half. At the end of the day there’s no shortage of sandwich shops out there, even if this is the only one that started out in the back of an antique shop.
Chuy’s (CHUY) — Down 46 percent this year
One of the hardest-hit casual-dining chains of 2014 is Chuy’s. The chain of lively Mexican restaurants — featuring Elvis Presley shrines, nacho bars out of makeshift car trunks and framed pet portraits — seems to be holding up well. It has rattled off 17 consecutive quarters of positive comparable-store sales.
With just 59 full-service restaurants offering Mexican eats, Chuy’s is still in its infancy. The reason that the stock has shed nearly half of its value this year is that it began the year at a lofty valuation. Chuy’s is growing, but it’s not growing fast enough to justify its earlier market cap.
Noodles & Co. (NDLS) — Down 28 percent this year
Noodles & Co. was one of last year’s hottest IPOs, soaring after going public at $18. A few trading days later, the stock was poking its head above $50. The fast-casual chain specializing in a wide array of international pasta dishes has a unique concept and plenty of room for expansion, but the good times didn’t last.
The 425-unit chain has been a disappointment lately. Sales do continue to grow at a healthy clip, fueled mostly by new eateries going up in new markets. Noodles & Co. expects to add as many as 62 restaurants by the time 2014 is done. It’s a different story on the bottom line, however, where the company has failed to live up to analyst profit forecasts in three of the past four quarters.
Yum Brands (YUM) — Down 5 percent this year
The parent company of Pizza Hut, KFC and Taco Bell has been running into speed bumps in what once seemed to be its most lucrative market. Concerns of food safety at a now former KFC supplier in China have kept diners away, and that’s problematic for a company with thousands of its eateries in the world’s most populous nation.
Yum Brands may be doing some bold things with Taco Bell — including going national with its creative breakfast menu — but investors want to see the company running on all cylinders before jumping back on.
McDonald’s (MCD) — Down 2 percent this year
Given the horrible 2014 that McDonald’s has been having, the real miracle is that shares of the world’s largest burger flipper are only trading marginally lower on a dividend-adjusted basis. After all, we’re talking about the titan that has posted negative year-over-year comps in 12 of the past 13 months.
McDonald’s is promising a simplified menu for 2015, and that includes eliminating eight items from its menu. A slimmed-down approach is likely the right way to go, but don’t be surprised if social media erupts with backlash from fans of the menu items getting nixed when the decision is made public.
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