Fast casual is not the hot stuff it once was. It used to be the big growth category for restaurants.
Led by Chipotle's hugely successful 2006 IPO, the category quickly exploded with competitors like Fiesta Restaurant, which went public in 2012, and Zoe's Restaurant, which debuted in the middle of last year. Burger joints Habit Restaurants and Shake Shack joined the game at the end of last year and in February of this year, respectively.
But while many are still posting respectable earnings, the guidance is getting more conservative. Specifically, the same-store sales growth isn't as strong as it once was.
Just look at the same-store sales guidance for three of these companies, all of which reported this week:
- 2014: 6.7%
- 2015 guidance: 4%-6%
- 2014: 4.1%
- 2015 guidance: low single digits
- 2014: 10.7%
- 2015 guidance: 2.5%-3.5%
By any definition, that is decelerating same-store sales growth.
This category in general still has the enthusiastic backing of most analysts, but investors have already begun weeding out many of these companies. Potbelly, which went public at the end of 2013, El Pollo Loco, which went public in the middle of last year, and Noodles & Co, which went public in 2013, are all well below their IPO prices.