Cosi Inc (NASDAQ:COSI) Looks Like A Stock In Trouble

Cosi Inc (NASDAQ:COSI) is a company in real trouble. In 2006, the fast casual food retailer went for just shy of $44 a share. It opened this morning's session at $0.26 – a more than 99% decay across the last decade. Management is in turmoil, with three different CEOs trying (and seemingly failing) to steady the ship since 2011, and the numbers underlying its operations are no better.The question is, can the company recover?As a quick introduction, Cosi is a casual dining company based in the US, with more than 115 stores both domestically and internationally, in the UAE and Costa Rica. It sells food across the entire day, with a menu primarily consisting of Italian inspired food – sandwiches, salads, that sort of thing.Cosi has been pushing for a turnaround for the last half decade, but numerous attempts have failed to reignite what was once a promising niche food outlet. Bigger, faster moving competitors have drawn its customers towards their own outlets and away from Cosi's, and this has had a noticeable, steep impact on sales.Data just released revealed a 1.6% decline in same store sales during the second quarter of 2016, and a 4.5% decline in just the four weeks to June 27. Management has revised its guidance on the back of the slip, and now expects to report far worse than expected numbers for 2016. RJ Dourney, Cosi’s president and CEO had this to say about the decline:

It is important to start with this: the magnitude of the second quarter’s comparative sales decline requires management to revise previously communicated guidance. The company will not reach positive adjusted EBITDA in the 2016 third quarter.

It's no surprise. Positive adjusted EBITDA has long eluded Cosi, and it now looks as though this elusiveness is set to remain for the foreseeable future:

The future timing of positive adjusted EBITDA is tied directly to our ability to generate revenue growth.

How can management fix the issue?It's a franchise model, and so the natural go to fix is to incentivize individual store owners to improve performance. The company tried this already, and so far, it's not been entirely ineffective. A focus on employee turnover (currently around 35%, which is high for the sector) and the introduction of restricted stock rewards have stemmed the blood flow, and franchise same store sales gained 0.5% during the second quarter (centrally owned stores declined 4.5%, which is how we got to the 1.6% overall decline mentioned above).What's important now, however, is that the company owned operations can mimic the performance of the franchises. Market sentiment surrounding the current CEOs allocation of cash over the last couple of years is weighing on capitalization, and this brings us to Cosi's biggest near term risk – delisting.Cosi fell below the $1 minimum listing threshold back in November, and the exchange notified the company of a pending delisting if it didn’t pull its stock back above the dollar mark within 180 days. It didn’t, and is now riding out a 180-day extension to this initial period, meaning it has until November 14, 2016, to break the $1 threshold and keep its NASDAQ listing. Falling sales and high management/staff turnover are bad enough. A seeming inability to move as fast as competitors like Panera Bread Co (NASDAQ:PNRA) and Chipotle Mexican Grill, Inc. (NYSE:CMG) makes things worse – and yes, these are the companies Cosi has to compete with if it wants to regain any semblance of authority in the sector. A delisting, however, could easily be the nail in the company's coffin.In our eyes, it's all about policy. Dourney is expected to offer up some insight into how he expects to bring company owned stores in line with the franchises this month, and this information could make or break the stock near term.Sign up to our free newsletter below to make sure you get this information as it breaks, and get in ahead of the market on this quick moving play. As a kicker, you'll also get our pick of the week and our eBook totally free!Disclosure: We have no position in COSI and have not been compensated for this article.