Panera Bread: Company Reports Q2/2015 Results

St. Louis / MO. (pbc) Panera Bread Company reported net income of 42 million USD, or 1.60 USD per diluted share, for fiscal Q2/2015. Diluted EPS for fiscal Q2/2015 was 1.61 USD or down seven percent, excluding charges recorded in fiscal Q2/2015 related to the Company’s previously announced re-franchising initiative of 0.01 USD per diluted share, and excluding the 0.08 USD per diluted share benefit in fiscal Q2 2014 from a favorable resolution of an insurance coverage matter. The fiscal Q2/2015 results compare to reported net income of 49 million USD, or 1.82 USD per diluted share, for fiscal Q2 2014.


  • Q2/2015 Revenue increased seven percent to 677 million USD
  • Q2/2015 Company-owned comparable net bakery-cafe sales up 2.4 percent
  • Q3 2015 (first 27 days) Company-owned comparable net bakery-cafe sales up 4.7 percent

Fiscal Q2/2015 Comparable Net Bakery-Cafe Sales Growth

In fiscal Q2/2015, Company-owned comparable net bakery-cafe sales increased 2.4 percent, franchise-operated comparable net bakery-cafe sales increased 1.1 percent, and system-wide comparable net bakery-cafe sales increased 1.8 percent compared to the same period in fiscal 2014. The Company-owned comparable net bakery-cafe sales increase of 2.4 percent in fiscal Q2/2015 was comprised of year-over-year transaction growth of 1.1 percent and average check growth of 1.3 percent.

Operating Margin

Operating margin for fiscal Q2/2015 declined approximately 150 basis points versus fiscal Q2 2014, excluding charges related to the Company’s re-franchising initiative. This decline was primarily the result of structural wage increases and costs related to our strategic initiatives, partially offset by lower general and administrative expenses reflecting the Company’s previously announced initiative to reduce core general and administrative expenses in fiscal 2015.

New Bakery-Cafe Development and AWS

During fiscal Q2/2015, the Company opened 18 new bakery-cafes and its franchisees opened twelve new bakery-cafes. As a result, there were 1’926 bakery-cafes open system-wide as of June 30, 2015. Average weekly sales («AWS”) for Company-owned «Class of 2015» bakery-cafes through fiscal Q2/2015 was 44’967 USD. AWS for franchise-operated «Class of 2015» bakery-cafes through fiscal Q2/2015 was 49’683 USD. As of fiscal Q2/2015, the Company had completed the conversion of 183 bakery-cafes to Panera 2.0, with 77 conversions completed year-to-date.

Update on Key Value Enhancing Initiatives

Use of Capital and Debt Financing: During fiscal Q2/2015, the Company repurchased 680’379 shares at an average price of 183.69 USD per share for an aggregate purchase price of approximately 125.0 million USD. The Company had approximately 533.4 million USD available under the 750 million USD repurchase authorization as of Q2/2015. On July 16, 2015, the Company secured a five-year, amortizing 300 million USD term loan. This term loan is incremental to the Company’s 100 million USD term loan due June 11, 2019. To hedge exposure to variability in cash flows due to the impact of changes in interest rates, concurrent with the issuance of the 300 million USD term loan, the Company entered into forward-starting interest rate swaps with total initial notional value of 242.5 million USD. Considering the interest rate swaps, the combined effective rate of the term loans is expected to average approximately three percent over the life of the loans.

Re-franchising: The Company continues to make significant progress on its plan to re-franchise 50 to 150 bakerycafes. On July 14, 2015, the Company completed the sale of 29 bakery-cafes to an existing franchisee, bringing the year-to-date total to 30 bakery-cafes. The Company remains on track to reach its re-franchising goal and expects to re-franchise approximately 50 additional bakery-cafes by the end of fiscal Q3 2015.

Full Year Fiscal 2015 Outlook

Diluted EPS: The Company today reiterated its full year fiscal 2015 diluted earnings per share growth target of flat to down mid- to high-single digits when compared to full year fiscal 2014, excluding charges in fiscal 2015 for the Company’s re-franchising initiative and certain items for full year fiscal 2014.

Comparable Net Bakery-Cafe Sales Growth: The Company reiterated its targeted range for fiscal 2015 Company-owned comparable net bakerycafe sales growth of 2.0 percent to 3.5 percent.

Operating Margin: For fiscal 2015, the Company continues to expect operating margin will be down 100 to 175 basis points when compared to fiscal 2014, excluding the impact of charges related to the Company’s re-franchising initiative.

New Bakery-Cafe Development: The Company continues to expect 105 to 115 system-wide new bakery-cafe openings in fiscal 2015 and is reconfirming its average weekly net sales performance target for new Company-owned bakery-cafes of 43’000 USD to 45’000 USD.

Panera 2.0 Conversions: The Company continues to expect the conversion of approximately 300 Company-owned bakerycafes to Panera 2.0 during fiscal 2015.

Concluding Comment

Ron Shaich, Chairman and CEO, commented, «Our strategic plan to generate increased shareholder value by making Panera a better competitive alternative with expanded growth opportunities is making a difference. Leading indicators are showing just that. Comp-store sales growth increased sequentially every month in Q2/2015 and reached 4.7 percent for the first 27 days of Q3. Panera 2.0, inclusive of digital access and improved operations, is working. Innovation in food, marketing and store design are having a positive impact on Panera’s competitive position. Our initiatives to expand into several USD 1B+ adjacent businesses, including catering, delivery and CPG, are generating powerful sales growth and show increasing promise. However, the impact of the startup and ramp up costs associated with the hundreds of Panera 2.0 conversions expected in the third and fourth quarters of 2015 and the hundreds more expected in 2016, along with the dozens of delivery hubs opened in the past eighteen months, will dampen near-term profit growth. In our history, sales have led and profits have followed, and we believe that will again be the case at Panera. In fact, our leading indicators give us increased confidence in our strategic plan and in our potential to reignite significant earnings growth».