Casual restaurant chain Noodles & Company (NASDAQ: NDLS) missed Wall Street’s revenue expectations in Q2 CY2025, with sales flat year on year at $126.4 million. The company’s full-year revenue guidance of $491 million at the midpoint came in 3.6% below analysts’ estimates. Its non-GAAP loss of $0.12 per share was significantly below analysts’ consensus estimates.

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StockStory’s Take

Noodles & Company’s second quarter results disappointed investors, with revenue and profit metrics missing Wall Street expectations and the stock declining sharply after the report. Management attributed the underperformance primarily to weaker guest traffic and a misalignment between new menu pricing and consumer value perception. CEO Andrew Madsen acknowledged that the nationwide launch of the revamped menu, intended to improve food quality and brand identity, did not deliver the expected lift in guest visits, noting, “We experienced an unexpected decline in guest value perception following our menu launch in March.”

Looking ahead, management’s outlook is shaped by ongoing efforts to reset value propositions, optimize restaurant operations, and address persistent cost pressures. The company is implementing new menu offerings and operational changes to regain traffic momentum, with incoming CEO Joe Christina highlighting a commitment to “enhancing the guest experience, strengthening operational execution, driving increased traffic and expanding unit level margins.” Management also signaled a more cautious stance on near-term cash flow and profitability, affirming that initiatives such as the new Duos value platform and targeted restaurant closures are aimed at stabilizing performance and setting a foundation for future growth.

Key Insights from Management’s Remarks

Management identified a disconnect between menu pricing and consumer expectations as the main driver of the quarter’s softer results, while also transitioning leadership and accelerating portfolio optimization.

• Menu transformation challenges: The nationwide rollout of the upgraded menu, designed to improve food quality and reposition the brand, led to an unanticipated decline in perceived value among guests. This was attributed to price increases outweighing the improvements in taste for some legacy dishes.
• Operational impact of menu change: The complexity of new recipes and higher ingredient costs created operational execution issues and increased food costs, prompting further menu adjustments and simplification, including the removal of the Green Goddess salad.
• Traffic and sales trends: Same-store sales growth was driven by higher average checks but offset by declining guest traffic. Lunch daypart performance lagged, attributed to greater value sensitivity and competition from industry-wide discounting.
• Digital engagement and loyalty: Digital orders through owned web and app platforms increased, and rewards program participation grew to 27% of transactions, reflecting ongoing investment in digital engagement and marketing promotions such as the Taste Tour campaign.
• Leadership transition and restaurant closures: CEO Andrew Madsen announced his departure for health reasons, with President and COO Joe Christina set to assume the role. The company is accelerating the closure of underperforming restaurants and expects to complete 28 to 32 closures in 2025 to improve profitability and system health.

Drivers of Future Performance

Management expects future performance to depend on value-driven menu additions, operational improvements, and the impact of portfolio optimization amid an uncertain consumer environment.

• Value-focused menu strategy: The introduction of the Duos platform, offering bundled meals at accessible price points, is intended to address guest demand for affordability and counter industry-wide discounting. Management expects this to help stabilize guest traffic, especially during value-sensitive dayparts like lunch.
• Restaurant portfolio optimization: Accelerated closures of underperforming locations are projected to enhance overall system profitability by removing negative cash flow units and boosting performance at nearby stores. The company also expects operational simplification to reduce costs and improve consistency.
• Cost discipline and cash flow: While management is prioritizing cost reductions and operational efficiencies, they no longer expect to achieve positive free cash flow this year due to short-term pressures, aiming instead for improvement in 2026 as new initiatives gain traction.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will watch (1) the sustained impact of the Duos platform and other value-focused menu initiatives on both guest traffic and check size, (2) progress on the closure of underperforming restaurants and the resulting effects on overall profitability, and (3) operational improvements in menu execution and cost control. New product launches, especially limited time offers, will also be important signposts for potential recovery.

Noodles currently trades at $0.82, down from $1.01 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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