St. Louis / MO. (pbc) Panera Bread Company reported net income of 42 million USD or 1,55 USD per diluted share for fiscal Q1/2014. The fiscal Q1/2014 results compare to net income of 48 million USD or 1,64 USD per diluted share for fiscal Q1/2013, which included a 2,2 million USD or 0,05 USD per diluted share, benefit from resolution of legal and tax matters. Highlights:
- Q1/2014 Revenue increased eight percent to 605 million USD
- Q1/2014 Company-owned new bakery-cafe AWS of 55’230 USD
- Q1/2014 Company-owned comparable net bakery-cafe sales up 0,1 percent
- Unfavorable weather impacted Company-owned comparable net bakery-cafe sales by 150 to 200 basis points
- Q2/2014 EPS target of 1,70 USD to 1,76 USD
- FY-2014 EPS target narrowed to 6,80 USD to 7,00 USD
Comparable Net Bakery-Cafe Sales Growth
In fiscal Q1/2014, Company-owned, franchise-operated and system-wide comparable net bakery-cafe sales on a calendar basis each increased 0,1 percent compared to the comparable period in fiscal 2013. The Company estimates severe weather negatively impacted fiscal Q1/2014 Company owned comparable net bakery-cafe sales results by approximately 150 to 200 basis points. The Company further estimates these fiscal Q1/2014 Company-owned comparable net bakery-cafe sales results were positively impacted by approximately 50 basis points from the shift of the Easter holiday from calendar Q1/2013 to calendar Q2/2014.
Note that on a fiscal basis, Company-owned comparable net bakery-cafe sales increased 0,7 percent. However, the Company believes that the calendar basis comparison better reflects the performance of the business as it eliminates the impact of the extra week in fiscal 2013 and compares consistent calendar weeks.
The Company-owned comparable net bakery-cafe sales increase of 0,1 percent in fiscal Q1/2014 was comprised of year-over-year average check growth of 2,9 percent and transaction decline of 2,8 percent. After adjusting for weather and the Easter holiday shift, the decline in fiscal Q1/2014 transactions was approximately 1,3 percent to 1,8 percent. Average check growth was comprised of retail price increases of approximately 1,7 percent and positive mix impact of approximately 1,2 percent.
Operating Margin
In fiscal Q1/2014, the Company experienced a decline in operating margin of approximately 250 basis points compared to fiscal Q1/2013. This decline was primarily the result of continued investments related to key initiatives designed to improve the Company´s operational capabilities, technical resources and customer experience, as well as increased marketing expenses and the untoward impact of unusually severe winter weather in fiscal Q1/2014.
New Bakery-Cafe Development and AWS
During fiscal Q1/2014, the Company opened 16 new bakery-cafes and its franchisees opened eleven new bakery-cafes. As a result, there were 1’800 bakery-cafes open system-wide as of April 01, 2014.
Average weekly sales (AWS) for Company-owned new bakery-cafes in fiscal Q1/2014 were 55’230 USD compared to 61’912 USD in the same period of fiscal 2013, which represents the second highest opening AWS in the Company´s history for fiscal Q1. AWS for franchise-operated new bakery-cafes in fiscal Q1/2014 was 58’891 USD compared to 51’543 USD in the same period of fiscal 2013. AWS for Company-owned new traditional bakery-cafes in fiscal Q1/2014 was 56’737 USD compared to 64’593 USD in the same period of fiscal 2013. AWS for Company-owned new non-traditional bakery-cafes in fiscal Q1/2014 was 35’901 USD compared to 52’779 USD in the same period of fiscal 2013. Non-traditional bakery-cafes refers to a range of alternate formats that the Company believes will allow it to more deeply penetrate existing and new territories with a range of different formats.
Use of Capital
During fiscal Q1/2014, the Company repurchased 271’412 shares at an average price of 184,22 USD per share for an aggregate purchase amount of approximately 50 million USD. The share repurchases had a nominal impact on the Company´s fiscal Q1/2014 earnings per diluted share. The Company has approximately 198 million USD remaining under its existing 600 million USD repurchase authorization as of the date of this release.
Fiscal Q2/2014 Outlook
The Company is targeting fiscal Q2/2014 diluted earnings per share of 1,70 USD to 1,76 USD, which would represent a range of a decrease of two percent to an increase of one percent in fiscal Q2/2014 versus the comparable period in fiscal 2013. The Company is announcing with this release that Company-owned comparable net bakery-cafe sales growth on a calendar basis in the first 27 days of fiscal Q2/2014 were approximately 0,4 percent. The Company estimates the shift of the Easter holiday from calendar Q1/2013 to calendar Q2/2014 negatively impacted the comparable sales results for the first 27 days by approximately 150 basis points.
Updated Fiscal Full Year 2014 Outlook
Diluted EPS: The Company is today narrowing its target range for fiscal 2014 earnings per diluted share to 6,80 USD to 7,00 USD. 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 the Company´s expectation that it will continue to repurchase shares consistently throughout the year but likely at lower targeted amounts compared to fiscal 2013. This full year fiscal 2014 diluted earnings per share target range is based on the following key assumptions:
Comparable Net Bakery-Cafe Sales Growth: The range for the Company´s fiscal 2014 Company-owned comparable net bakery-cafe sales growth is now narrowed to 2,0 percent to 3,5 percent. The Company 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.
Operating Margin: For fiscal 2014, the Company continues to expect operating margin will be down 75 to 125 basis points when compared to fiscal 2013. This target reflects the full year impact of the key initiatives and related investments that are underway.
New Bakery-Cafe Development and AWS: The Company is maintaining its previous target of 115 to 125 system-wide new bakery-cafe openings in fiscal 2014 and its average weekly net sales performance target for new Company owned bakery-cafes of 41’000 USD to 43’000 USD for fiscal 2014.
Concluding Comment
Ron Shaich, Chairman and CEO, commented, «Investors should view Q1 against the backdrop of Panera´s comprehensive effort – extending over multiple years – to shape the future of our company. Historically, every five to ten years, Panera has re-staged its business to drive future growth. Each time, these efforts have yielded material and sustained earnings growth. We are intent on doing that yet again. In March, at our Investor Day, we laid out our vision and plans to enhance Panera´s competitive position while, at the same time, expand opportunities for growth. We believe that these initiatives have the potential, over the next few years, to create a new inflection point for Panera».
