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 March 29, there were 1,997 bakery-cafes in 46 states, the District of Columbia and in Ontario, Canada doing business under the Panera Bread, Saint Louis Bread Co. and Paradise Bakery & Café names, delivering fresh, authentic artisan bread served in a warm environment. (Source: Company’s Website)
The company is in six categories: soup, mac 'n' cheese, salad dressing, coffee, frozen bread and sliced bread.
The company recently had a strong second quarter with year-over-year growth in non-GAAP EPS. The company raised its midpoint of its non-GAAP EPS target. It is diversifying into a kids' menu and a lot of healthier choices.
Second-quarter results
GAAP net income during the second quarter was $35 million, or $1.46 per diluted share, (which marked a decrease of 9% from $42 million, or $1.60 per diluted share, in the prior-year quarter).
Non-GAAP diluted EPS was $1.78 during the current quarter (which marked an increase of 11% from $1.61 in the prior-year quarter).
Total revenue during the quarter was $698.9 million (which marked an increase of 3% from $676.6 million in the prior-year quarter).
During the second quarter, company-owned comparable net bakery-cafe sales increased by 4.2%, franchise-operated comparable net bakery-cafe sales increased by 0.6%, and systemwide comparable net bakery-cafe sales increased by 2.3% from the prior-year quarter. Two-year company-owned comparable net bakery-cafe sales increased by 6.6%, two-year franchise-operated comparable net bakery-cafe sales increased 1.7%, and two-year systemwide comparable net bakery-café sales increased 4.1%.
Bakery-cafe margin for the second quarter increased by about 120 basis points from the prior-year quarter.
GAAP operating margin for the second quarter decreased by approximately 150 basis points from the prior-year quarter.
Non-GAAP operating margin during the second quarter decreased by about 50 basis points from the prior-year quarter.
During the quarter, the company opened nine new bakery-cafes, and its franchisees opened eight new bakery-cafes. As a result, there were 2,007 bakery-cafes open systemwide as of June 28.
On May 19 the company's board of directors approved a new three-year share repurchase authorization of up to $600 million and terminated the prior repurchase authorization. During the fiscal second quarter, under the share repurchase authorizations, the company repurchased 351,376 shares at an average price of $213.45 per share for an aggregate purchase price of approximately $75.0 million. The company has approximately $572.7 million available under the current $600 million repurchase authorization as of fiscal second quarter.
A glimpse into six months performance
Total revenues during the current six months increased to $1.384 billion (which was $1.325 billion in the prior six months period).
Net income attributable to Panera Bread Company was $69.589 billion (which was $73.789 billion in the prior six months).
Diluted EPS was $2.90 (which was $2.79 in the prior-year six months).
(Source: Company’s website)
Expectations for 2016
| Â | Range |
| Full-year fiscal 2016 non-GAAP diluted earnings per share | To range between $6.60 and $6.70 |
| Non-GAAP operating margin | To be down by 50 to 100 basis points |
| Company-owned comparable net bakery-cafe sales growth | To be between 4.0% and 5.0% |
| Systemwide bakery-cafe openings | To be around 90 to 100 |
Focus
- Improvement of quality.
- It is constantly investing in technology and operations.
- Building capabilities to handle volumes.
- Strengthening reputation.
- Creating remodels with lower investment costs.
- It plans to roll out delivery to more than 10% of its system in 2016 including both company and franchise cafes.
Going healthy
The company does not use artificial preservatives or short cuts, just bakers with simple ingredients and hot ovens. It has crafted a healthy menu of soups, salads and sandwiches that it caters to the customers. Nowadays people are more health conscious and Panera is taking care of that and is committed to remove artificial additives (flavors, colors, sweeteners and preservatives) from the food in its bakery-cafes.
Kids menu
The company has come up with a Kids Meal Promise in a bid to improve foods for kids. This meal is promoted with the promise of no artificial flavors, preservatives, sweeteners or colors from artificial sources. Options like organic yogurt, sprouted grain rolls or apples will be there. Not many restaurants at the moment are offering specifically designed kids meals. Kids will have wholesome meal choices in this category. This endeavor can go a long way in creating benefits for the company.
Conclusion
Over the last 20 years, Panera shares delivered a total return of more than 4,700% to shareholders, compared to about 200% for the Standard & Poor's 500. The company is reaching new heights by outperforming most of its peers. According to the company, digital sales could reach $1 billion by the end of 2017.
In order to cater to the customers in a better way, this company has come up with mobile ordering and Rapid Pick-Up for to-go orders – all designed to make its customers happy. The company is maintaining a steady momentum. Right now, its strategies and initiatives are paying off. It is poised for a better future, and adding this company will create shareholder returns.
Disclosure: I do not hold any position in the company.
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