Panera Bread Company (PNRA): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We downgrade our recommendation on Panera Bread to Underperform from Neutral due to dismal second quarter 2014 results. While earnings of $1.74 remained flat year over year, it missed the Zacks Consensus Estimate by 0.6%. The downside reflects higher expenses incurred to improve guest experience and higher food and marketing costs. Though revenues of $631.1 million increased year over year, it missed the consensus mark by 1.4% due to muted comps. Higher expenses also resulted in margin decline. The company is spending heavily to improve operational capabilities, enhance guest experience and strengthen its position. These expenditures will continue to hurt margins. Additionally, rising food costs that have affected the industry at large would further dent margins. Given the cost pressure, the company has lowered its fiscal 2014 earnings guidance, thereby raising concerns.

Overview:

Based in Richmond Heights, MO and founded in 1981, Panera Bread Co. is engaged in the ownership and franchising of bakery-cafes in the United States under the Panera Bread, Saint Louis Bread Co. and Paradise Bakery & Caf brands. As of Jul 1, 2014, the company had 1,818 bakery-cafes operating under the Panera Bread, Saint Louis Bread Co. and Paradise Bakery & Caf brands.

Its bakery cafes primarily offer baked goods, dough items, custom roasted coffees, and cafe beverages. The company's bakery cafes are located in suburban, strip mall, and regional mall locations.

The company operates through three business segments: company bakery-cafe operations, franchise operations, and fresh dough and other product operations. As of Jul 31, 2014, the company had 891 company-owned bakery cafes and 927 franchise operated bakery-cafes located throughout the United States and in Ontario, Canada. Panera Bread's 24 fresh dough facilities supply fresh dough and other products daily to most company-owned and franchise operated bakery-cafes.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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