WHAT YOU NEED TO KNOW
  • Jersey Mike’s stock has fallen nearly 13% since its $21 per share debut in late July.
  • CEO Charlie Morrison called the shares undervalued and cited 20 consecutive quarters of positive comparable store sales growth.
  • Third quarter comparable store sales rose 3%, while the chain recorded 9% unit growth.
  • Management is emphasizing catering, younger customers and tests of later operating hours after lowering its annual outlook.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Jersey Mike's CEO Charlie Morrison is defending the sandwich chain's business after a difficult start for its publicly traded shares. The stock has remained under pressure since the company completed its initial public offering earlier this year.

Jersey Mike's shares have fallen nearly 13% since their debut on the New York Stock Exchange. The stock began trading at $21 per share in late July before sliding to as low as $16.09 in early October.

Shares recovered somewhat from that low and finished October at around $18. That still left the stock well below its debut price and gave Morrison an opening to argue that Wall Street is overlooking the company's underlying performance.

“While the stock has been challenged, we think the shares are generally undervalued,” Morrison told Yahoo Finance. He said Jersey Mike's is targeting “long-term sustainable” growth while building on 20 consecutive quarters of positive comparable store sales growth.

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The chain reported that comparable store sales increased 3% during the third quarter. Jersey Mike's said the result was driven by transaction growth, while its number of units grew 9%.

Despite those gains, Jersey Mike's reduced its outlook for the year. Morrison linked softer business during September and October to weaker consumer sentiment amid the “spike in interest rates and spikes in fuel prices.”

The company also announced a $100 million share buyback program this past week. Morrison said the program “showcases the confidence we have in the business,” offering a direct response to the stock's weak performance since the public debut.

As management works to strengthen the business, catering and the pursuit of new customers are emerging as important near term priorities. Catering has already become a larger contributor to the sandwich chain's sales.

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“Sandwiches are very portable,” Morrison said. “They're used for lunch events all the time and we think Jersey Mike's should be a leader in the catering side of the business.”

Catering sales have climbed roughly 17% so far this year and now represent about 4% of total sales. Historically, catering accounted for approximately 3% of sales, indicating that the channel has gained a larger share of the company's business.

Some analysts on Wall Street support the catering push. TD Cowen analyst Andrew Charles wrote to investors, “We remain bullish on the long-term opportunity, as we believe Jersey Mike's product is particularly well suited to the occasion.”

Jersey Mike's is also examining whether later operating hours could help it attract more business. Morrison said the chain's primary customer tends to be older, but customers between the ages of 18 and 34 are a central part of its expanding customer base.

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“Our stores do close relatively early compared to most brands in the US, and as we approach this younger audience, we know that they tend to be more night owls than perhaps our typical customer base,” Morrison said.

Store closing times differ by franchisee and location, though most Jersey Mike's restaurants close at around 9 p.m. or 10 p.m. Morrison previously served as CEO of Wingstop, a chain that remained open later and attracted younger customers during those hours.

“I was with Wingstop for many years, and we were open late and knew that younger audience really, really well and knew what they're craving during that time frame,” Morrison said. He added, “I don't think alcohol needs to play into it to be successful, but I do think there is a real opportunity to still share of those occasions over time.”

For now, Jersey Mike's plans to test the later hours strategy before making any broader changes to its schedule. The experiment comes as the company balances customer expansion, catering growth, a reduced annual outlook and a stock still trading below its IPO price.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.