Panera Bread Co.
) posted third quarter 2012 adjusted earnings of $1.24 per share,
comfortably surpassing the Zacks Consensus Estimate of $1.19 and
year-ago-quarter's earnings of 97 cents per share. The
better-than-expected results were driven by solid top-line growth
and superior operating margins.
Inside the Headline Numbers
The restaurant chain's total revenue escalated 17% year over year
to $529.3 million in the third quarter and beat the Zacks
Consensus Estimate $522.0 million.
System-wide comparable net bakery-cafe sales in the quarter
expanded 5.8%. The company-owned comparable net bakery-cafe sales
increased a handsome 6.2% driven by transaction growth of 0.6%
and average check growth of 5.6%. A pricing action of
approximately 3.0% and positive mix impact of approximately 2.6%
drove average check growth. Franchise-operated comparable net
bakery-cafe sales also grew 5.5%.
The company's operating margin enhanced 80 basis points backed by
better bakery-cafe margins. However, increased costs induced by
year-over-year rise in wheat prices and higher zero margin
produce sales to franchisees offset the margin gain to some
During the quarter, Panera opened 17 new company-owned
bakery-cafes and 19 franchised bakery-cafes. As of September 25,
2012, the company operated 1,625 bakery cafes, of which 792 were
company owned and the rest were franchised.
For 2012, the company anticipates to be at the high end or
marginally above the earlier forecasted unit development target
of 115-120 units.
For 2013, the company expects to unveil approximately 115-120
Panera expects earnings to be in the range of $1.72-$1.74 per
share for the fourth quarter (earlier guided range $1.66-$1.70).
The company anticipates fourth quarter company-owned comparable
sales in the range of 5%-6%.
For full-year 2012, Panera raised its earnings per share guidance
from $5.72-$5.78 to $5.86-$5.88, reflecting a year-over-year
earnings growth of around 29%. In the prior quarter, management
had boosted its guidance from $5.58-$5.63 to $5.72-$5.78 per
share (26-27% year over year). Prior to that quarter, management
had increased its guidance from $5.50-$5.55 to $5.58-$5.63 per
Company-owned comparable net bakery-cafe sales growth is expected
to be in the range of 6.0%-6.5% (previously 5.5%-6.5%). In the
prior quarter, management had boosted its guidance from 4.5%-5.5%
For full-year 2013, Panera issued earnings per share guidance in
the range of $6.85-$7.00 (up 17-19% year over year). Management
aims to achieve company-owned comparable net bakery-cafe sales
growth in the range of 4.5%-5.5% for fiscal 2013. The company's
operating margin will likely be in the range of flat to 50 basis
points of increment in fiscal 2013.
We remain optimistic on the stock based on Panera's earnings and
revenue beat, strong 2013 outlook, continued margin improvement
and increases in its full-year guidance in three consecutive
quarters amid a sluggish business environment. The company's
dominant position in the bakery-cafe business and more stable
traffic than most of its restaurant peers also inspire optimism
around the stock. The company is also likely to enjoy a favorable
effect from 53rd week operation in fiscal 2013.
However, stiff competition and wheat price inflation are expected
to remain headwinds. Panera, which competes with
Chipotle Mexican Grill Inc.
(CMG), currently carries a Zacks #3 Rank, which translates into a
short-term 'Hold' rating. We are maintaining our long-term
"Neutral" recommendation on the stock.
CHIPOTLE MEXICN (CMG): Free Stock Analysis
PANERA BREAD CO (PNRA): Free Stock Analysis
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