Mark Holder
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Mark Holder in Out Fox The $treet,

Zoe's Kitchen: Gap Fill At $30

Zoe's Kitchen (ZOES) is down big after hours following weak revenue numbers for Q2. listed these key stats for the quarter and guidance:

  • Reports Q2 (Jun) earnings of $0.06 per share, in-line with the Capital IQ Consensus of $0.06; revenues rose 21.7% year/year to $66.3 mln vs the $67.19 mln Capital IQ Consensus.
  • Comparable restaurant sales increased 4.0%, consisting of a 0.9% increase in transactions and product mix, combined with a 3.1% increase in price.
  • Restaurant contribution margin increased 40 basis points to 21.7% as the Company continued to benefit from lower commodity prices, which were partially offset by an increase in labor and store operating expenses.
  • Co issues downside guidance for FY16, lowers FY16 revs to $277-280 mln from $277-281 mln vs. $280.64 mln Capital IQ Consensus; comps +4-5% from +4.5-6.0%; margins to 20.5-20.8% from 20.5-21.0%.

My previous research focused on waiting for a dip below $35 to buy the restaurant concept. Now the chart below suggests the gap at $30 will close in early trading tomorrow. 

The market appears to be over reacting to some market timing issues as the comp sales growth and contribution margins were solid. Look for a dip buying opportunity. 

Disclosure: Long ZOES