To strive and prosper well in this competitive market, one must satisfy the needs of customers as well as its valued investors. This is because both are the life blood of a company. At the end of the day, investors expect a pocketful of return for their hard-earned money. Quick serve restaurant chain Panera Bread Co. (NASDAQ:PNRA) especially known for its gourmet sandwiches served on freshly baked breads is performing well.
About This Quick Serve Restaurateur
With a market cap of $4.106 billion, Panera Bread operates 1,800 company-owned and franchise-operated bakery-cafe locations in 44 states, the District of Columbia, and Ontario, Canada. Panera Bread is a national bakery-cafe concept, and operates under the Panera Bread, Saint Louis Bread Co. and Paradise Bakery & Cafe trademark names. Its bakery-cafes are located in urban, suburban, strip mall, and regional mall locations. The Company operates in three business segments: Company bakery-cafe operations, franchise operations, and fresh dough and other product operations.
- Warning! GuruFocus has detected 6 Warning Signs with PNRA. Click here to check it out.
- PNRA 15-Year Financial Data
- The intrinsic value of PNRA
- Peter Lynch Chart of PNRA
On April 29, 2014, the St. Louis-based company reported better-than-expected first quarter 2014 results. The restaurant chain’s total revenue grew 7.8% year over year to $605.3 million, owing to an increase of 7.6% in revenues from company-owned bakery-cafe, 8.7% increase in franchise royalties and fees and an 8.5% increase in fresh dough and other product sales to franchises. Net income for the quarter was $42 million, or $1.55 per diluted share.
System-wide comparable net bakery-cafe sales in the quarter increased only 0.1%, lower than 3.3% in the year-ago quarter and 1.1% in the fourth quarter, reflecting the impact of a severe winter that hurt customer visits, partially offset by the shift of Easter to the second quarter. In fiscal Q1 2014, the company experienced a decline in operating margin of approximately 250 basis points to 11.1% compared to fiscal Q1 2013. This is mainly due to higher expenses incurred by the company for its initiatives to improve operational capabilities and an increase in marketing expenses. A chart has been provided below to show Panera’s average weekly sales (AWS) in different cafes.
During fiscal Q1 2014, Panera repurchased 271,412 shares at an average price of $184.22 per share for an aggregate purchase amount of approximately $50 million. The share repurchases had a nominal impact on the company's fiscal Q1 2014 earnings per diluted share. The company has approximately $198 million remaining under its existing $600 million repurchase authorization as of the date of this release.
The company narrowed its earnings per share guidance for the year and expects it in the range of $6.80 to $7.00 compared with the previous expectation range of $6.80 to $7.05. This range assumes the company will continue to make investments in key initiatives consistent with its strategic plan throughout fiscal 2014. This range also includes Panera's expectation that it will continue to repurchase shares consistently throughout the year, but likely at lower targeted amounts compared to fiscal 2013.
The company also narrowed its guidance for company-owned units, and expects it in the range of 2.0% to 3.5% compared with the prior range of 2.0% to 4.0%. Panera continues to expect both comparable net bakery-cafe sales growth and transaction growth to strengthen in the second half of fiscal 2014 as a result of the timing and momentum of initiatives that are underway. For fiscal 2014, the company continues to expect operating margin will be down 75 to 125 basis points when compared to fiscal 2013. The decline reflects higher expenses associated with significant investments planned for the company's bakery-cafes.
To have more customers in its arena, Panera is making familiar food fantastic. The company is also creating a powerful consumer connection by executing a multi-year marketing strategy to drive increased brand affiliation. Additionally, this gourmet sandwich king is focused on operations to deliver consistently.
To sustain future growth by creating a better customer experience, Panera has introduced “Panera 2.0” on June 5, 2014. This will enhance the customer experience by improving the time it takes to get orders completed, as well as allowing customer-specific customization in individual orders. Further, a chart has been provided below to show the company’s plan for the future.
Charts from company website
On a Concluding Note
The people of America are becoming more and more health conscious as obesity is growing at a great pace. This points the finger towards the fast-food industry as they are using trans fats (responsible for clogging arteries) in their products to make them more mouth-watering. This has paved the way for Panera to strengthen its foothold as all of its bakery-cafes have a menu highlighted by antibiotic-free chicken, whole grain bread, and select organic and all-natural ingredients, with zero grams of artificial trans fat per serving, which provide flavorful, wholesome offerings. Its menu includes a wide variety of year-round favorites complemented by new items introduced seasonally with the goal of creating new standards in everyday food choices. Although the company has given a weak outlook for 2014, it will provide a yummy menu and good return to its valued investors in the long run.