Impact of Hardie's Business Attrition on Volume and Profitability
Hardie's protein and produce programs were partially or fully exited during Q2, impacting reported case growth and volume metrics.
Excluding these programs, specialty case growth was 5.8%, and center-of-the-plate pounds increased by 5.8%.
The company expects continued impact on reported volume numbers until the second half of 2026, as they fully cycle out these high-volume, low-margin programs.
Management emphasizes that shedding non-core business improves overall profitability and aligns with their long-term strategic focus.
Record Gross Profit Margin Achieved in Q2 2025 at 52.7%
Gross profit margin increased to a record 52.7% in Q2, representing a 170 basis point expansion from previous quarters.
This margin expansion is attributed to operational improvements, product rationalization, and higher-margin product introductions.
Management emphasized this as a result of strong performance across operations and supply chain teams, with expectations to sustain or improve margins through ongoing mitigation efforts.
Adjusted EBITDA increased 2.5% to $146.6 million, and adjusted EPS rose 7.4% to $0.29, supported by fewer shares outstanding and productivity gains.
Free cash flow generation remained strong at $109.5 million in the first half of 2025, reflecting disciplined capital allocation and investments.
Global systemwide sales declined 1.8% in Q2 2025, driven by a 3.6% decline in U.S. same-restaurant sales, partially offset by 8.7% growth in International sales.
Returned $262 million to shareholders year-to-date through dividends and share repurchases, with plans to return approximately $325 million in 2025.
U.S. company-operated restaurant margin contracted by 30 basis points to 16.2%, impacted by higher commodity costs, wage inflation, and lower traffic.
Consolidated adjusted EBITDA declined modestly to approximately $53 million, impacted by $9 million incremental loyalty and marketing investments and higher costs.
Domestic Company-owned restaurant segment EBITDA margins declined about 220 basis points due to labor inflation, aggregator fees, advertising, and food costs, partially offset by average ticket growth.
Global system-wide restaurant sales were $1.26 billion, up 4% in constant currency in Q2 2025.
International comparable sales grew 4%, reflecting progress in transformation initiatives.
Net cash provided by operating activities was approximately $67 million for the first half of 2025, with free cash flow of $37 million, up $24 million primarily due to timing and working capital improvements.
North America commissary segment adjusted EBITDA margins improved by 130 basis points to 7.3%.
North America comparable sales increased 1%, with transaction comps also up 1%, driven by strategic investments and initiatives.
Total available liquidity was approximately $500 million with a gross leverage ratio of 3.4x at quarter end.
Total revenues increased 4% to $529 million, driven by higher commissary revenues despite declines in Company-owned restaurant revenues due to refranchising.
Strategic Focus on Long-Term Growth Initiatives and Brand Positioning
Management has clarified their brand positioning and established four strategic priorities: team member experience, handcrafted food and beverages, WOW hospitality, and keeping BJ's atmosphere fresh.
Progress includes momentum with value platforms like the Pizookie Meal Deal, and brand relevance through innovative offerings like the Snickers Pizookie and Fryckles.
Long-term initiatives are set to roll out in the second half of 2025 and into 2026, with a focus on sustainable and profitable growth.
Top 4 DMAs (Los Angeles, San Francisco, Houston, Phoenix) experienced outsized macroeconomic pressures in Q2, contributing to a 30 basis point reduction in system-wide same-restaurant sales.
Markets affected by macro pressures saw a significant downturn starting mid-June, punctuated by headlines and macroeconomic news.
Management remains optimistic that consumer sentiment volatility will moderate over time, which could stabilize sales.
Dafinchi
