Update: Zoe's Kitchen Q2 '14 Preliminary Estimates And Secondary Pricing

Aug.14.14 | About: Zoe's Kitchen (ZOES)


Zoe's Kitchen released preliminary estimates for Q214 and priced offering of secondary.

Keep buy recommendation based on comp sales growth.

Previous research anticipated the strong results and stock rally following the pricing of the secondary.

On August 11, Zoe's Kitchen (NYSE:ZOES) released strong preliminary Q214 sales numbers and released details on the proposed secondary offering for selling shareholders. Later on August 13, the company announced the pricing of the upsized secondary offering. The stock is currently rallying 4% mid-day with offering priced and out of the way.

First, the preliminary numbers were very bullish. For a recent IPO, these numbers again confirm that management wasn't distracted by the IPO process. Zoe's Kitchen released that comp sales increased between 7.3% and 7.5% for the 12 week period ended July 14. The comp sales accelerated from the 5.7% generated in the Q114 period. Total revenue is expected to hit between $41.6 million and $41.8 million, easily exceeding the $40.3 million estimates of analysts. Second, the selling shareholders unloaded 4.5 million shares at $30.25. The underwriters have an option to purchase an additional 675,000 shares. The pricing was very strong considering the stock had traded down to $28 to start the month.

The previous investment thesis in the article "Don't Go Loco And Ignore Zoe's Kitchen" urged investors to buy shares of Zoe's on the weakness caused by the proposed secondary. With strong comp sales and the ability to expand the concept more than 10-fold over the long-term, the stock is a buy at around 4x revenue expectations for the year.

Disclosure: The author is long ZOES. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.