Freshii Inc.'s founder defended the eatery's decision to withdraw its outlook through its 2019 financial year after falling short on several measures in its most recent quarter, while the company's stock plummeted nearly 30 per cent.
"We didn't have enough confidence to revise the numbers again with conviction," said Matthew Corrin, the company's CEO, during a conference call with analysts Thursday morning — a day after the company released its third-quarter results.
The decision was mainly due to the fact that the company missed its projected net new store openings, he said, due to a number of things outside management's control.
The Toronto-based eatery opened 10 net new stores in its third quarter, ending Sept. 30, as it opened 18 locations and closed eight.
The company had expected to have 730 to 760 stores by the end of its 2019 financial year. It had previously anticipated having at least 810 stores by that time, but lowered its expectations in September 2017.
It is now scrapping the revised figures.
Predicting the timeline from signing a franchisee partner to when the store will open is difficult, Corrin said, due to the increasing number of markets in which Freshii operates. The eatery can be found in more than 35 states and provinces, he said, and 17 countries.
Nuances between each location create unpredictability, he said.
The company has also formalized a process to either change franchisee ownership or close locations that fall in the bottom 10 per cent based on an internal algorithm, he said, which accounts for the higher number of store closures this quarter.
Still, Corrin assured analysts that the development pipeline remains healthy as Freshii has 175 stores in what it calls the active opening process.
The company also experienced challenges in achieving its forecasted sales, expenses and earnings.
Sales for restaurants open at least a year, a key retail metric, decreased 0.8 per cent compared with a same-store sales growth of 5.1 per cent in the third quarter of 2017.
That marks the company's first negative result for that metric in 22 quarters, Corrin said, adding the more years a company produces positive same-store sales, the more challenging it becomes to beat those results.
The decision to scrap its outlook through the 2019 financial year will allow Freshii's franchise partners and team at headquarters to focus on making decisions that are in the long-term interest of the company and its shareholders, he said.
"We further believe that this increasingly long-term focus on the health of our network will allow us to better maximize shareholder value."
The company's shares fell $1.08 or 27.14 per cent to $2.90 in afternoon trading on the Toronto Stock Exchange.
One day earlier, the company announced plans to buy back up to 10 per cent of its 25.6 million shares over the next year, believing that its share price doesn't fully reflect its value.
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Companies in this story: (TSX:FRII)
Aleksandra Sagan, The Canadian Press