NEW YORK – Friday was an exceptionally good day for Potbelly Corp. (NASDAQ: PBPB) as the company enjoyed a successful IPO with shares more than doubling in their debut. According to Reuters, the IPO benefited from investor interest as they to grab a piece of the sandwich maker whose low-priced menus have appealed to consumers in a tough economy.
Potbelly’s IPO was just another sign of the food industry’s strength as shares of Sprouts (NASDAQ:SFM) has gained more than 120 percent since their IPO in August and restaurant change Noodles & CO (NASDAQ:NDLS) has more than doubled since their June debut.
Shares in Potbelly started the day at $ 14.00 and closed at $ 30.77, raising $ 105 million more than the company had expected. According to analysts, chains such as Potbelly and Noodles are attracting diners by using higher quality ingredients that average fast-food chains and are offering lower prices that casual dining chains such as The Olive Garden – owned by Darden Restaurants (NYSE:DRI).
In doing so, these chains are trailblazing the ‘fast-casual’ category that appeals to consumers who lack the time to cook and eat, but want to believe they are eating healthy. Harry Balzer, chief industry analyst of the market research firm NPD Group said that ‘the overall trend is to go for speed and money.’
Sales at fast-casual eateries jumped 13.2 percent in 2012, more than double the pace at which fast-food chains increased their sales, according to the consulting firm Technomic. Casual dining sales rose just 2 percent during the period.
In 2012, sales at Potbelly rose more than 15 percent to just under $ 275 million with a profit of $ 24 million. In their IPO documents, the company noted that they have posted positive same-store sales growth in 12 of the last 13 quarters.
However, there is some concern that Potbelly might be overpriced at $ 30. At current prices, the stock was trading at a multiple of about 40 times trailing 12-month earnings, which is higher than that of most competing casual restaurant chains.
Today Potbelly has close to 300 locations, mostly in the Midwest, but David Menlow, president of IPOFinancial.com said that ‘it is gaining a lot of interest in areas outside the Midwest, where it seems to be focused currently, and expansion potential seems to be reminiscent of popular food chains that are going to succeed in markets.’