Noodles & Company outlines expanded restaurant closures and lowers 2025 revenue guidance amid leadership transition

Earnings Call Insights: Noodles & Company (NDLS) Q2 2025

MANAGEMENT VIEW

* Andrew H. Madsen, CEO, announced his decision to step down at the end of August due to health reasons, stating, "After careful consideration, I have made the difficult decision to step down at the end of August as CEO of Noodles & Company due to health reasons that require my full attention and focus." He confirmed Joe Christina, President and COO, will become the new CEO, expressing complete confidence in his leadership.
* Madsen addressed Q2 results, noting, "While we delivered positive same-store sales in a choppy consumer environment for our segment, overall results were below our expectations going into the quarter." He cited an unexpected decline in guest value perception following the March menu launch and discussed swift actions to address this, including the rollout of the new Duos value platform and menu adjustments to improve operational execution and reduce food costs.
* The new menu, launched March 12, featured a significant marketing push and a focus on food quality. Madsen highlighted, "We are encouraged to see sales of our new Signature Mac & Cheese menu have grown significantly."
* Joseph D. Christina, incoming CEO, stated, "I am focused on enhancing the guest experience, strengthening operational execution, driving increased traffic and expanding unit level margins."
* CFO Michael Hynes reported, "In the second quarter, our total revenue decreased 0.7% compared to last year to $126.4 million." He also confirmed, "Net loss for the second quarter was $17.6 million or a loss of $0.38 per diluted share compared to a net loss of $13.6 million or a loss of $0.30 per diluted share last year."

OUTLOOK

* The company revised full-year 2025 guidance, projecting total revenue of $487 million to $495 million, comp restaurant sales growth of 2.5% to 4%, and restaurant contribution margin between 11.8% and 12.6%.
* Hynes stated, "Based on our revised guidance, we no longer expect to be free cash flow positive in 2025, but we'll continue working toward becoming free cash flow positive in 2026."
* Planned closures of 28 to 32 company-owned restaurants in 2025 and 12 to 17 in 2026 were confirmed.

FINANCIAL RESULTS

* System-wide comp restaurant sales increased 1.5%, with company-owned restaurants also up 1.5% and franchise restaurants up 1.6%.
* Company comp traffic during the second quarter decreased 2.5% and average check increased 4%.
* Company average unit volumes rose 2.3% to $1.35 million.
* COGS for the quarter were 26.5% of sales, a 180 basis point increase from last year, primarily driven by higher food costs associated with new menu offerings.
* Labor costs for the second quarter were 31.7% of sales; hourly wage inflation was 2.7%.
* Restaurant level contribution margin was 12.8%, down from 15.5% in Q2 2024.
* Adjusted EBITDA for the second quarter was $6 million compared to $9.2 million in the second quarter of 2024.
* The quarter included $1.7 million in one-time costs related to the menu rollout and an $11.9 million noncash impairment charge.
* Nine company-owned restaurants were closed year-to-date; capital expenditures for the quarter totaled $3.4 million.

Q&A

* NOT_APPLICABLE: The Q&A section was not included in the provided transcript content, so no analyst questions or management responses are available for review.

SENTIMENT ANALYSIS

* Analysts' sentiment cannot be determined as their questions and tone are not present in the transcript.
* Management commentary in prepared remarks was direct, acknowledging challenges while expressing confidence in new initiatives and leadership. Madsen described actions as "working quickly to address" the traffic shortfall and emphasized encouragement from recent sales trends.
* Compared to the previous quarter, the tone shifted from optimism and celebration of momentum to a more cautious and corrective stance, with repeated references to challenges in value perception and the need for operational adjustments.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2025 revenue was revised downward from $503 million to $512 million (previous call) to $487 million to $495 million.
* The company now anticipates a greater number of restaurant closures in 2025 and 2026 compared to prior expectations.
* Same-store sales decelerated from a 4.7% increase in Q1 at company-owned restaurants to 1.5% in Q2.
* Management tone moved from high confidence and affirmation of strategic plans in Q1 to a more defensive and adaptive posture in Q2, explicitly addressing value perception issues and operational challenges.
* Analysts’ focus in the previous quarter was on sustained momentum and margin improvement; in the current quarter, the company is more focused on mitigation and recovery.

RISKS AND CONCERNS

* Madsen identified "an unexpected decline in guest value perception following our menu launch" as a key challenge.
* The company faced higher food and labor costs, as well as one-time expenses related to the menu change.
* There are ongoing concerns about value sensitivity among consumers, especially at lunch, and industry-wide promotional activity.
* Hynes cited noncash impairment charges related to underperforming restaurant closures and confirmed a lack of expected free cash flow in 2025.
* The company is making menu and operational adjustments, increasing value offers, and strengthening leadership in response to these risks.

FINAL TAKEAWAY

Noodles & Company is undergoing significant leadership transition and operational recalibration, responding to challenges in guest value perception, margin pressure, and slower-than-anticipated sales momentum following a major menu rollout. The company has revised its revenue outlook downward, signaled a more aggressive restaurant closure plan, and delayed expectations for free cash flow positivity. Management remains focused on restoring momentum through value initiatives, operational improvements, and new leadership, while monitoring evolving consumer demands and industry dynamics closely.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ndls/earnings/transcripts]

MORE ON NOODLES & COMPANY

* Noodles & Company (NDLS) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813344-noodles-and-company-ndls-q2-2025-earnings-call-transcript]
* Noodles & Company outlines $487M-$495M 2025 revenue guidance while accelerating portfolio optimization and CEO transition [https://seekingalpha.com/news/4485085-noodles-and-company-outlines-487m-495m-2025-revenue-guidance-while-accelerating-portfolio]
* Noodles & Company Q2 2025 Earnings Preview [https://seekingalpha.com/news/4478903-noodles-and-company-q2-2025-earnings-preview]
* Seeking Alpha’s Quant Rating on Noodles & Company [https://seekingalpha.com/symbol/NDLS/ratings/quant-ratings]
* Historical earnings data for Noodles & Company [https://seekingalpha.com/symbol/NDLS/earnings]