Panera Bread Company Reports Operating Results (10-Q)

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Nov 06, 2009
Panera Bread Company (PNRA, Financial) filed Quarterly Report for the period ended 2009-09-29.

Panera Bread Company operates a retail bakery-cafe business and franchising business under the concept names Panera Bread Company and Saint Louis Bread Company. The concept specializes in high quality food for breakfast and lunch including fresh baked goods made-to-order sandwiches on freshly baked breads soups salads custom roasted coffees as well as other cafe beverages and targets suburban dwellers and workers by offering a premium specialty bakery and cafe experience with a neighborhood experience.> Panera Bread Company has a market cap of $1.92 billion; its shares were traded at around $61.41 with a P/E ratio of 22.8 and P/S ratio of 1.4. Panera Bread Company had an annual average earning growth of 20% over the past 5 years.

Highlight of Business Operations:

For the thirteen weeks ended September 29, 2009, we earned $0.61 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 2.8 percent (3.3 percent for Company-owned bakery-cafes and 2.5 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 1.9 percent to $39,383 ($38,655 for Company-owned bakery-cafes and $39,913 for franchise-operated bakery-cafes); 19 new bakery-cafes opened system-wide (nine Company-owned bakery-cafes and ten franchise-operated bakery-cafes); and two franchise-operated bakery-cafes closed. Our results for the thirteen weeks ended September 29, 2009 of $0.61 per diluted share included $0.04 per diluted share of net charges primarily to increase reserves for certain state sales tax audit exposures, which were partially offset by a gain recorded on both, the redemptions we received during the quarter on our investment in the Columbia Strategic Cash Portfolio, referred to as the Columbia Portfolio, and the change in the recorded fair value of the units held as of September 29, 2009.

For the thirteen weeks ended September 23, 2008, we earned $0.45 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 3.3 percent (3.0 percent for Company-owned bakery-cafes and 3.5 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 1.5 percent to $38,633 ($37,424 for Company-owned bakery-cafes and $39,550 for franchise-operated bakery-cafes); and 24 new bakery-cafes opened system-wide (seven Company-owned bakery-cafes and 17 franchise-operated bakery-cafes). Our results for the thirteen weeks ended September 23, 2008 of $0.45 per diluted share included a $0.01 per diluted share net charge from the write-down of our investment in the Columbia Portfolio, partially offset by the gain recorded on the redemptions received during the quarter. Our results for the thirteen weeks ended September 23, 2008 also reflected the significant increase in commodity prices year-over-year that is further discussed below under Results of Operations Costs and Expenses.

For the thirty-nine weeks ended September 29, 2009, we earned $1.82 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 1.0 percent (1.0 percent for Company-owned bakery-cafes and 1.1 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 0.2 percent to $39,033 ($38,178 for Company-owned bakery-cafes and $39,657 for franchise-operated bakery-cafes); 47 new bakery-cafes opened system-wide (17 Company-owned bakery-cafes and 30 franchise-operated bakery-cafes); and ten bakery-cafes closed system-wide (four Company-owned bakery-cafes and six franchise-operated bakery-cafes). Our results for the thirty-nine weeks ended September 29, 2009 of $1.82 per diluted share included $0.08 per diluted share net charges primarily to increase reserves for certain state sales tax audit exposures and to write-off smallwares related to the rollout of new china, partially offset by a gain recorded on both, the redemptions received during the period on our investment in the Columbia Portfolio and the change in the recorded fair value of the units held during the period.

For the thirty-nine weeks ended September 23, 2008, we earned $1.38 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 3.7 percent (4.3 percent for Company-owned bakery-cafes and 3.4 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 1.9 percent to $38,939 ($37,830 for Company-owned bakery-cafes and $39,783 for franchise-operated bakery-cafes); 70 new bakery-cafes opened system-wide (27 Company-owned bakery-cafes and 43 franchise-operated bakery-cafes); and six bakery-cafes closed system-wide (four Company-owned bakery-cafes and two franchise-operated bakery-cafes). In addition, beginning in the first quarter of fiscal 2008, we adjusted our 2008 development plans and made a determination to raise our sales hurdles for new bakery-cafe development and to no longer develop specific sites. As a result of this determination, we recorded a charge of $2.8 million, or $0.07 per diluted share, for the thirty-nine weeks ended September 23, 2008, to general and administrative expenses related to severance, the write-off of capitalized assets and overhead costs and the termination of leases for specific sites that we decided to no longer develop. Our results for the thirty-nine weeks ended September 23, 2008 of $1.38 per diluted share also included an aggregate $0.04 per diluted share negative impact from unfavorable tax adjustments and the net loss recorded on both the redemptions received during the period on our investment in the Columbia Portfolio and the change in the recorded fair value of the units held during the period. Our results for the thirty-nine weeks ended September 23, 2008 also reflected the significant increase in commodity prices year-over-year that is further discussed below under Results of Operations Costs and Expenses.

Bakery-cafe sales for the thirteen weeks ended September 29, 2009 increased 6.5 percent to $285.9 million compared to $268.5 million for the thirteen weeks ended September 23, 2008. The increase in bakery-cafe sales for the thirteen weeks ended September 29, 2009 compared to the same period in 2008 was primarily due to the opening of 25 new Company-owned bakery-cafes since September 23, 2008 and to the 3.3 percent increase in comparable Company-owned bakery-cafe sales for the thirteen weeks ended September 29, 2009. This 3.3 percent growth in comparable bakery-cafe sales was driven by approximately 1.8 percent of transaction growth and 1.5 percent average check growth. Average check growth, in turn, was comprised of retail price increases of 2.3 percent and negative mix impact of 0.8 percent in comparison to the same period in the prior year. In total, Company-owned bakery-cafe sales as a percentage of total revenues increased by 0.1 percentage point to 85.3 percent for the thirteen weeks ended September 29, 2009 as compared to 85.2 percent for the same period in 2008. In addition, the increase in average weekly sales for Company-owned bakery-cafes for the thirteen weeks ended September 29, 2009 compared to the same period in 2008 was due to an increase in transactions and average check growth. The average weekly sales per Company-owned bakery-cafe and the number of operating weeks for the periods indicated were as follows:

Franchise royalties and fees for the thirty-nine weeks ended September 29, 2009 increased 6.6 percent to $57.2 million compared to $53.7 million for the thirty-nine weeks ended September 23, 2008. The components of franchise royalties and fees for the periods indicated were as follows (in thousands):

Read the The complete ReportPNRA is in the portfolios of John Hussman of Hussman Economtrics Advisors, Inc., Ron Baron of Baron Funds, Richard Perry of Perry Capital.