What Happened?

Shares of casual restaurant chain Noodles & Company (NASDAQ: NDLS) fell 23.2% in the morning session after the company reported disappointing second-quarter 2025 financial results and lowered its full-year guidance. The fast-casual restaurant chain missed analyst expectations across the board. Revenue was $126.4 million, falling short of the $131.6 million consensus estimate. The company's adjusted loss per share of $0.12 was double the $0.06 loss analysts had anticipated. Profitability also deteriorated significantly, with the operating margin plummeting to negative 11.7% from a positive 1% in the same quarter last year, reflecting rising costs that the company could not pass on to customers. Compounding the issue, Noodles & Co. substantially lowered its full-year revenue outlook to a midpoint of $491 million, a 3.3% decrease from its prior forecast and below Wall Street's expectations. The collection of negative results prompted a sell-off in the shares.

The shares closed the day at $0.75, down 25.8% from previous close.

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What Is The Market Telling Us

Noodles’s shares are extremely volatile and have had 82 moves greater than 5% over the last year. But moves this big are rare even for Noodles and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 1 day ago when the stock dropped 3.2% on the news that a disappointing earnings report from peer CAVA Group (CAVA) created negative sentiment across the fast-casual restaurant sector. The negative sentiment stemmed from peer CAVA Group, whose shares plunged 24% after its second-quarter earnings update fell short of Wall Street's expectations. CAVA reported same-restaurant sales growth of just 2.1%, significantly missing analysts' forecast of 6.1%, and subsequently trimmed its full-year sales outlook. CAVA’s CEO noted that the consumer is “less firm-footed” than the previous year, sparking broader concerns about the health of the fast-casual dining industry. This news created a ripple effect, dragging down several restaurant stocks, including Noodles & Company. The sector-wide anxiety was amplified by the fact that Noodles & Company was scheduled to report its own quarterly earnings after the market close, with investors already cautious due to the company's recent history of missing earnings estimates.

Noodles is up 22.9% since the beginning of the year, but at $0.72 per share, it is still trading 57.8% below its 52-week high of $1.71 from August 2024. Investors who bought $1,000 worth of Noodles’s shares 5 years ago would now be looking at an investment worth $85.05.

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