Jersey Mike’s Subs Inc. released its first earnings report following its initial public offering. The company reported adjusted results that were stronger than expected, although net income fell from the previous year due to higher interest costs and other expenses. Adjusted EBITDA rose 7% to $114 million, driven by transaction growth and improved operational performance. The company’s revenue was $208 million for the second quarter.
Same-store sales grew 2.3% during the quarter, accelerating from the first quarter and showing momentum in customer traffic. CEO Charlie Morrison said the company’s performance demonstrated progress toward achieving $2 million average unit volumes per store.
Jersey Mike’s reported average unit volume of about $1.376 million during the quarter, compared with $1.354 million a year earlier.
The company opened 83 new stores during the quarter and ended the period with a total of 3,378 locations. Digital orders made up 43% of total sales, a small increase from the previous year’s 41%. Jersey Mike’s also reported operating cash flow of $105 million for the first two fiscal quarters and had $265 million in cash, cash equivalents and restricted cash at the end of the quarter.
The company forecast third-quarter same-store sales growth of 3% to 4% and full-year adjusted EBITDA growth of at least 20%. It also expects full-year same-store sales growth of 2.5% to 3% and net unit growth of at least 8%.
Chief Financial Officer Michele Allen said that same-store sales gains were mostly driven by increased transaction volume. The company reported no material impact from the recent cyclospora outbreak. During its earnings call, Jersey Mike’s said it uses domestically sourced whole-head lettuce that is cut fresh in its stores rather than bagged or pre-cut lettuce.
Jersey Mike’s stock price rose after the earnings report, with TD Cowen analyst Andrew Charles maintaining a Buy rating and a $26 price target. Shares rose nearly 8% on the day of the report.
The Jersey Mike’s IPO was priced in July at $23 per share and involved about 43.5 million shares, giving the offering a value of roughly $1 billion. The company itself sold about 13.8 million shares, while existing shareholders sold most of the remaining shares.
Jersey Mike’s plans to broaden its customer base, expand its digital business and introduce new products as it continues opening stores. Morrison said the company saw accelerating sales trends heading into the third quarter.
The results came less than two months after Jersey Mike’s began trading on the New York Stock Exchange under the ticker JMKE. The company said it ended the second quarter with 3,348 stores in the United States and 30 international franchised locations.
IMAGE: Jersey Mike’s, Brookfield Plaza, Springfield, Virginia Source Own work Author Ser Amantio di Nicolao CC4