St. Louis / MO. (pbc) Panera Bread Company reported financial results for fiscal Q1/2017. Highlights: Q1/2017 GAAP Diluted EPS of 1.88 USD, up 30 percent. Q1/2017 Non-GAAP Diluted EPS of 1.83 USD, up 17 percent. Q1/2017 Company-owned comparable net bakery-cafe sales up 5.3 percent, up 11.5 percent on a two-year basis. Q1/2017 Company-owned comp sales outperform Black Box all-industry composite by 690 basis points. Digital sales now at 26 percent of total sales in Company-owned bakery-cafes. Delivery now available in 24 percent of system-wide bakery-cafes.
On April 04, 2017, the Company and JAB Holding Company entered into a definitive merger agreement under which JAB will acquire Panera for 315 USD per share in cash, in a transaction valued at approximately 7.5 billion USD, including the assumption of approximately 340 million USD of net debt. The merger agreement was unanimously approved by the Company’s Board of Directors.
The transaction is not subject to a financing condition and is expected to close during the third quarter of 2017, subject to the approval of the Company’s shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.
Comment by Chairman and CEO
Ron Shaich, Chairman and CEO, commented, «Over the last five years, we have developed and executed a powerful strategic plan to be a better competitive alternative with expanded runways for growth. The themes we have bet on – digital, clean food, loyalty, delivery, and new formats for growth – are shaping the restaurant industry today. Outside the big three pizza players, Panera is leading the industry in digital, with 26 percent of sales now digital. We are the first and only national restaurant chain with a 100 percent clean menu. Our loyalty program is the largest in the industry at 25 million members with half our transactions through the program. And our omni-channel approach leads the industry, with delivery now available in 24 percent of the system and catering sales growing 11 percent».
Shaich continued, «Indeed, the power of our plan is evident in our business results. In Q1, our Company-owned bakery-cafe comps were up 5.3 percent. What’s more, we continued to take market share in Q1, as our comps outperformed the Black Box all-industry composite by 690 basis points. With peak investments and significant scale behind us, our year-over-year growth in GAAP EPS was up 30 percent and non-GAAP EPS was up 17 percent in Q1, our best quarter in four years, which is further evidence that we have reached an inflection point in our transformation».
Shaich concluded, «Finally, as this may be the last quarter in which we report as a public company, I would like to thank our shareholders and the financial community for their support of Panera, and me personally, over our more than two decades as a public company. Know that your support of our approach to building value over the long term and our efforts to truly serve all stakeholders has enabled Panera to be the best-performing restaurant stock when measured over the last 20 years. Specifically, all of us at Panera are so very pleased we have been able to deliver for our long-term shareholders, generating annualized returns of 26 percent from April 18, 1997 to April 24, 2017».
Fiscal Q1/2017 Results and Business Review
GAAP net income for fiscal Q1/2017 was 42 million USD, or 1.88 USD per diluted share, or up 30 percent when compared to GAAP net income for fiscal Q1 2016 of 35 million USD, or 1.45 USD per diluted share. Non-GAAP diluted EPS was 1.83 USD for fiscal Q1/2017 and 1.56 USD for fiscal Q1 2016, up 17 percent.
Comparable Net Bakery-Cafe Sales Growth
In fiscal Q1/2017, Company-owned comparable net bakery-cafe sales increased 5.3 percent, franchise-operated comparable net bakery-cafe sales increased 0.3 percent, and system-wide comparable net bakery-cafe sales increased 2.6 percent compared to the same period in fiscal 2016. Two-year Company-owned comparable net bakery-cafe sales increased 11.5 percent, two-year franchise-operated comparable net bakery-cafe sales increased 3.6 percent, and two-year system-wide comparable net bakery-cafe sales increased 7.3 percent. Additionally, Company-owned comparable net bakery-cafe sales in fiscal Q1/2017 outperformed the Black Box all-industry composite by 690 basis points.
GAAP operating margin for fiscal Q1/2017 increased approximately 150 basis points versus fiscal Q1 2016. Excluding certain items in both fiscal periods non-GAAP operating margin for fiscal Q1/2017 increased approximately 30 basis points versus fiscal Q1 2016. The increase in non-GAAP operating margin was primarily driven by lower food cost, partially offset by structural wage increases and added labor hours for our delivery initiative.
New Bakery-Cafe Development and AWS
During fiscal Q1/2017, the Company opened 10 new bakery-cafes and its franchisees opened three new bakery-cafes. As a result, there were 2’042 bakery-cafes open system-wide as of March 28, 2017. Average weekly sales (AWS) for Company-owned «Class of 2017» bakery-cafes through fiscal Q1/2017 was 64’506 USD. AWS for franchise-operated «Class of 2017» bakery-cafes through fiscal Q1/2017 was 46’899 USD.
During fiscal Q1/2017, the Company repurchased 235’936 shares at an average price of 211.89 USD per share for an aggregate purchase price of approximately 50 million USD. The Company has approximately 347.7 million USD available under the current 600 million USD repurchase authorization as of fiscal Q1/2017.
Fiscal 2017 Outlook, Conference Call, Shareholder Meeting Update
On April 04, 2017, the Company and JAB entered into a definitive merger agreement under which JAB will acquire Panera. The Company will not be updating its outlook for fiscal 2017 and will not be holding a conference call to discuss its fiscal Q1/2017 results. The Company’s Board of Directors has postponed the Company’s 2017 Annual Meeting of Shareholders, originally scheduled for May 18, 2017.