The restaurant industry has been sliding down due to the recession and a weak economy. The fourth quarter also witnessed a drop due to weather conditions and the festive season. The slide in sales in the last quarter that ended in December as compared to the quarter that ended in September led to a negative 0.2% growth for the industry.
Furthermore, annual same store traffic was gloomy for the industry with a negative value of 2.1% for 2013 as compared to 1% growth that was reported in 2012. This goes on to say consumers are on serious diet plans.
Despite the hard hitting conditions and traffic falling in this industry, some brands in this segment of restaurants have been quite successful to rebound. Panera Bread (PNRA, Financial) is one such brand that rebounded.
Investors who believed in Panera Bread were not let down by the company as it rebounded in fourth quarter 2013 after a weak performance in quarter three, which left many investors restless. This is exemplified by the fact that it did record a growth of 1.3%, leveraged by price revision although the total number of transactions declined 1%.
The company recorded revenue of $661 million as against $571.5 million a year ago, up by 18.8% and a sequential growth of 15%. It opened 41 new stores in the quarter, which boosted revenue and not forgetting the price revision which also influenced the comparative year-ago quarter’s revenue growth. The total store count for Panera now is 1,777. Cumulative same store sales also increased 1.1%, although same store sales owned by the company increased by 1.7%, while the franchise unit witnessed a 0.5% increase.
The company is focused on its upgrade plan —Â Panera 2.0 — to stimulate its sales in the future and has serious plans with expansion and online ordering and quick pick up services to boost sales and customer satisfaction. Panera 2.0 mainly features “Rapid Pick-Up” and “Enhanced To-Go and Eat-In.” The company has allocated a handsome budget for its Panera 2.0 vision. The company plans to spend around $42 million just on technology. The company estimates that the new technology cost per bakery would be around $125,000.
Rapid Pick Up enables a customer to order from the web or iOS and pick up from the shelves. This has already been implemented in around 149 locations in specific areas of the U.S. The company plans to implement this nationwide by the end of this year.
Reports based on test sampling show that about 20% to 30% percent of orders are initiated from kiosk, web and mobile platforms. These figures are comparatively less as compared to pizza chains which record almost 50% in the form of digital orders. Panera 2.0 is packages with operational enhancements with plans for smaller restaurants. So, Panera anticipates more growth in terms of digital ordering which can influence its top and bottom lines.
Conclusion
Panera rebounded in quarter four after its third quarter results were not so appealing to investors, but the company’s history of two decades shows that Panera is used to striking back. Panera 2.0 should be implemented nationwide by end of fiscal 2014 and this again will help the performance of the company. Hence, investors looking for investment options in this industry could consider Panera Bread for their portfolio.
