CEO Resignation Leaves Noodles & Co (NASDAQ:NDLS) Soggy


Kevin Reddy has exited as the chairman and CEO of Noodles & Co (NASDAQ: NDLS). It is something that investors were clearly not prepared for and the shock has adversely impacted the stock.

Besides the issue of sudden CEO resignation, Noodles & Co (NASDAQ: NDLS) also reported preliminary 2Q2016 revenue that looked weaker than the average estimate of analysts covering the stock. On top of that, analysts at Jefferies have issued a bearish note on Noodles, citing the weakening fundamentals of restaurant business.

Management shakeup

When a change comes suddenly, it scares off some people. In the case of Noodles, the company said that its CEO for more than 10 years decided to step down with the change taking effect immediately.

It doesn’t look like Reddy is leaving Noodles & Co (NASDAQ: NDLS) because of any disagreements with the board or others in the management team. In Reddy’s own words, he just felt that the time was ripe for him to call it quits at Noodles so that it can pursue other goals in life.

The fact that Reddy is cutting almost all connections with Noodles has heighted investor anxiety over his exit. Not only has Reddy stepped down as chairman and CEO of Noodles, but he has also resigned as member of the company’s board. There also no word whether he would stay behind for some time to advise the management through the transition period.

Reddy’s replacement

Noodles & Co (NASDAQ: NDLS) has tapped Robert Hartnett to replace Reddy as the chairman of the company. The board also selected CFO Dave Boennighausen to act as caretaker CEO as the company continues with the search for a permanent holder of the office.

The board is looking at internal and external candidates to fill the vacant CEO position.

Preliminary 2Q results

Noodles & Co (NASDAQ: NDLS)’s preliminary results for 2Q2016 have offered a cause for investor concern. The company is modeling revenue of $121 million, which falls behind the consensus estimate of revenue of $124.56 million.

The company also said that same-store sales and company-owned outlets fell nearly 1% in 2Q with franchise same-store sales declining nearly 2%.

Stock downgrade for Noodles & Co (NASDAQ: NDLS)

The analysts at Jefferies downgraded their rating on the stock of Noodles & Co (NASDAQ: NDLS) to a HOLD from a BUY.


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