Noodles & Co. Jumps After Winning Back More Carb-Phobic Diners

(Bloomberg) -- Noodles & Co. is making a successful counterattack in the war on carbs.

The pasta chain, hurt by Americans embracing paleo diets and other low-carbohydrate regimens, is trying to prove it can still be healthy. An array of leaner options is winning back customers and will soon include zoodles -- a zucchini noodle dish that’s already built a following. This approach helped sales beat estimates last quarter, sending its stock to its biggest rally in almost five years.

The chain is trying to bounce back from an overly aggressive expansion that followed its 2013 initial public offering. Diet trends have not been kind to a chain whose name is synonymous with pasta, but the latest efforts appear to be paying off.

“Improved results give us confidence that we are gaining traction,” Chief Executive Officer Dave Boennighausen said in a statement.

Though sales continued to fall last quarter, the drop was smaller than expected. The decline was 0.9 percent on a same-store basis, compared with an estimated decrease of 2.7 percent. Revenue also topped projections, sending the shares up as much as 20 percent to $7.40 on Thursday. 

Last year, the chain closed more than 60 underperforming restaurants, and slowed new store openings. It now has about 470 locations, which are mostly owned by the company.

The menu changes also include more varied items such as Thai green curry and potstickers. Noodles also sells gluten-free options, and its new zoodles dish will go nationwide in May.

“One area that we identified a gap in our menu was in health perception,” Boennighausen said. The new item may help “introduce the brand to new guests who may have avoided us in the past,” he said.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Jonathan Roeder

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