The Panera Bread (PNRA, Financial) legacy began in 1981 as Au Bon Pain Co. Inc. Founded by Louis Kane and Ron Shaich, the company prospered along the East Coast of the U.S. and internationally throughout the 1980s and 1990s and became the dominant operator within the bakery-cafe category.
As of July 1, 2014, there were 1,818 bakery-cafes in 45 states and in Ontario Canada operating under the Panera Bread, Saint Louis Bread Co. and Paradise Bakery & Café names, delivering fresh, authentic artisan bread served in a warm environment by engaging associates. It is famous for its gourmet sandwiches, which are hits among its consumers.
The company reported a strong fourth quarter. The company is confident that the results will continue to strengthen as the startup and transition costs associated with its initiatives begin to crest and the sales figures continue to grow. It now expects the EPS rate to grow in 2016 and further accelerate in 2017. The company is poised to sustain double-digit earnings growth.
Fourth-quarter results
Reported net income during the quarter was $43 million, or $1.74 per diluted share ($48 million, or $1.82 per diluted share, in the prior-year quarter).
For the full year, reported net income was $149 million, or $5.79 per diluted share ($179 million, or $6.64, during the prior-year period).
During the fourth quarter, comparable net bakery-cafe sales increased by 3.6%, franchise-operated comparable net bakery-cafe sales increased 1.1%, and systemwide comparable net bakery-cafe sales increased 2.3% compared to the same period in fiscal 2014.
The company-owned comparable net bakery-cafe sales increase of 3.6% in fiscal Q4 2015 was comprised of year-over-year transaction growth of 1.1% and average check growth of 2.5%.
Operating margin during the fourth quarter declined around 60 bps from the prior-year quarter excluding charges related to the company's refranchising initiative.
During the fourth quarter, the company opened 18 new bakery-cafes and its franchisees opened 15 new bakery-cafes. For full year fiscal 2015, the company and its franchisees opened 112 new bakery-cafes (57 company-owned and 55 franchise-operated). As a result, there were 1,972 bakery-cafes open systemwide as of Dec. 29, 2015.
During fiscal Q4 2015, the company repurchased 683,051 shares at an average price of $182.97 per share for an aggregate purchase price of approximately $125.0 million. During full year fiscal 2015, the company repurchased a total of 2,201,719 shares at an average price of $181.65 per share for an aggregate purchase price of approximately $399.9 million. The company has approximately $283.5 million available under the current $750 million repurchase authorization as of fiscal Q4 2015.
Initial full year 2016 outlook
The company expects the following:
- EPS growth rate to be around 2% to 5%.
- Operating margin will be down 50 to 100 bps when compared to fiscal 2015.
- The company's fiscal 2016 new bakery-cafe target is 90 to 100 systemwide bakery-cafe openings and the average weekly net sales performance target for new company-owned bakery-cafes is $45,000 to $47,000.
(Source: Company’s website)
Focus
- Quality.
- Convenience.
- Positioning in the marketplace.
- Improving competitive position.
- Expanding growth opportunities.
- Ensuring that it has the capabilities to improve competitive position and expand growth.
- Maintaining credibility through results.
On a concluding note
Panera has its presence felt in many states. Franchise-operated bakery-cafe locations are there in 45 states and Canada. It is undoubtedly one of the leading bakery franchises in North America.
There are reports of more and more people across the globe becoming obese. A large section of the American population is afflicted with obesity. More people are trying to avoid junk foods.
Panera has delivered over the last 15 years a total return of nearly 4,000% to shareholders, as compared to 39% for the Standard & Poor's 500. Over the past five years, the company has delivered a total return to shareholders of more than 100%, as compared to about 75% for the S&P 500. These results demonstrate that Panera’s board and management have a track record of executing step function initiatives that create significant value.
Panera has been restaging its business to fuel its growth. The company is making programs to draw customers by participating in a multiyear marketing strategy. Innovation plays a key role in any company’s success, and Panera is working continuously on innovating and modifying its menu. With changing preferences, Panera will also cater to the changed demands of its customers.
Disclosure: I do not hold any position in the company
