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Popeyes shares plummet 10 percent on downgraded same-store sales estimate

A sign for Popeyes fast-food restaurant hangs in the Figueroa Corridor area of South Los Angeles.
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A sign for Popeyes fast-food restaurant hangs in the Figueroa Corridor area of South Los Angeles.

Yet another restaurant has fallen victim to softening sales across the restaurant industry.

Shares of Popeyes Louisiana Kitchen fell more than 10 percent in trading Wednesday after the company on Tuesday posted weaker-than-expected same-store sales growth for the second-quarter and lowered its same-store sales growth estimate for the year from a range of 2 percent to 3 percent to between 1 percent and 2 percent.

Cheryl Bachelder, CEO of Popeyes, said that slower sales were consistent with the sector. Even as Popeyes sales weakened during the quarter, the company grabbed market share, hitting a record of 26.6 percent of the quick-service chicken segment.

Industrywide same-store sales continue to come up short of Wall Street expectations. Restaurants like McDonald's, Wendy's and Ruby Tuesday, among others, have blamed growing consumer uncertainty ahead of November's election and increased competition from convenience stores, grocery chains and meal delivery services for the shortfall.

"I wish I knew," Bachelder said of the cause of the slowing sales, during an earnings conference call on Wednesday. She pointed to low consumer confidence, customers eating at home more often and menu fatigue associated with value promotions as possible catalysts.

"I think the sector needs to improve," she said. "The consumer needs to be eating out more often in general for all of us to prosper. ... I'd sure like to see more vitality in the sector on traffic."

Popeyes, which met analysts' expectations with its earnings of 47 cents per share, reported weaker-than-expected revenue of $61.7 million in the period. Wall Street had expected revenue of $63.4 million, according to Thomson Reuters.

Recently, Popeyes shares were trading at $53.62, down $4.68, or 8.3 percent.