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Potbelly serves up quarterly profit

Potbelly plans price increase, incentive plans for managers

Potbelly posted a third-quarter profit Tuesday, as the sandwich chain worked to attract diners and regain sales momentum.

Sales at long-standing locations improved each month as the quarter progressed, Chairman and CEO Aylwin Lewis said in a statement.

The company said it still has a lot of work to do on everything from decreasing wait times to working on retaining higher-level restaurant staff. During an afternoon conference call, Lewis outlined several steps Potbelly is taking, such as adding people to take orders while customers wait in line to pushing new incentive plans for salaried managers. Potbelly, which toasts its sandwiches, also now has high-speed ovens in all of its shops, he said.

The company said it plans to again raise prices as it deals with higher costs ranging from food to minimum wage increases in certain states. It raised prices in February and July, and plans for more increases in January focused on its main "Originals" sandwiches, where Chief Financial Officer Charles Talbot said Potbelly has not raised prices in "several years."

Potbelly earned almost $2 million, or 6 cents per share, in the quarter that ended Sept. 28, compared with a loss of $52.5 million, or $12.29 per share a year earlier, when results were dragged down by costs, including a dividend.

Excluding one-time items, Potbelly earned 9 cents per share, down from 16 cents per share a year earlier, but topping analysts' forecasts of 7 cents per share.

Revenue rose 8.5 percent, to $84.7 million, exceeding Wall Street's expectations.

Comparable sales at company-operated stores open at least 15 months rose 0.5 percent in the quarter after two consecutive quarters of declines. On average, three analysts expected quarterly same-store sales to decline 0.3 percent, according to Consensus Metrix.

Potbelly said it still expects comparable sales to be flat to down in a low single-digit percentage range this year. Such sales rose 1.5 percent in 2013. Lewis said the company knows it has "plenty of work to do" to sustain its long-term goal of low single-digit percentage gains in comparable sales.

Chicago-based Potbelly got its start in 1977, when an antiques store on Lincoln Avenue began offering warm sandwiches and desserts to customers to help boost sales. Its second shop opened in 1997, and it went public in October 2013. Today, the chain has more than 300 locations, most of which are company-owned. It plans to open 40 to 48 new locations this year.

Potbelly still expects to earn about 18 cents to 21 cents per share this year, excluding items, but said it now expects its profit to come in at the middle to higher end of that range. In 2013, it earned 34 cents per share.

Shares of Potbelly jumped more than 4 percent to $13.25 in Nasdaq trading before the results were announced, and fell to $13 after the report.

When Potbelly went public, the shares priced at $14 and ended their first day of trading at $30.77.

jwohl@tribune.com

Twitter @jessicawohl

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