Panera Bread: Reports Q1/2016 Financial Results

St. Louis / MO. (pbc) Panera Bread Company reported in April financial results for fiscal Q1/2016. Q1/2016 Company-owned comparable net bakery-cafe sales increased 6.2 percent. Q1/2016 EPS grew 21 percent on a reported basis; 11 percent, excluding one-time items. Company raises FY-2016 comparable net bakery-cafe sales target to 4.0 percent to 5.0 percent. Company raises FY-2016 EPS target, excluding one-time items, to 6.50 USD to 6.70 USD, up 5 percent to 8 percent.

Ron Shaich, Chairman and CEO, commented, «By any measure, we are pleased with our first quarter results. Our growth in same-store sales and transactions was the best we generated in four years and we outperformed the Black Box all-industry composite by the widest margin we have ever recorded. In addition, in the quarter, our earnings per share grew by 21 percent and, when excluding one-time items, earnings per share grew by 11 percent. These results make us ever-more confident in our strategy. As a result, today, we are raising our full-year 2016 targets for same-store sales growth and earnings per share. More importantly, as our initiatives roll out and mature, we can clearly see the potential that they represent for sustained earnings expansion at Panera».

Fiscal Q1/2016 Results and Business Review

Reported net income for fiscal Q1/2016 was 35 million USD, or 1.45 USD per diluted share, or up 21 percent when compared to reported net income for fiscal Q1/2015 of 32 million USD, or 1.20 USD per diluted share. Excluding one-time items in both quarters, diluted EPS was 1.56 USD for fiscal Q1/2016 and 1.41 USD for fiscal Q1/2015, or up 11 percent.

	Q1/2016	Q1/2015	Change
Total revenue	USD 685’153	USD 648’504	6 percent
Net income, excluding certain items	USD 37’831	USD 37’425	1 percent
Refranchising loss, after-tax	(680)	(5’565)
Amount reserved for a legal matter, after-tax	(2’063)	—
Net income, as reported	USD 35’088	USD 31’860	10 percent
Diluted EPS, excluding certain items	USD 1.56	USD 1.41	11 percent
Refranchising loss	(0.03)	(0.21)
Amount reserved for a legal matter	(0.08)	—
Diluted EPS, as reported	USD 1.45	USD 1.20	21 percent
Shares used in diluted EPS	24’214	26’569	-9 percent

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Comparable Net Bakery-Cafe Sales Growth

In fiscal Q1/2016, Company-owned comparable net bakery-cafe sales increased 6.2 percent, franchise-operated comparable net bakery-cafe sales increased 3.3 percent, and system-wide comparable net bakery-cafe sales increased 4.7 percent compared to the same period in fiscal 2015. The Company-owned comparable net bakery-cafe sales increase of 6.2 percent in fiscal Q1/2016 was comprised of year-over-year transaction growth of 2.4 percent and average check growth of 3.8 percent.

Operating Margin

As reported, operating margin for fiscal Q1/2016 increased approximately 40 basis points versus fiscal Q1/2015. This increase reflects approximately 120 basis points of benefit from the year-overyear decline in charges related to the Company’s refranchising initiative, partially offset by approximately 50 basis points for the amount reserved for a legal matter in fiscal Q1/2016 recorded in general and administrative expenses. Excluding charges related to the Company’s refranchising initiative and the amount reserved for a legal matter, operating margin for fiscal Q1/2016 decreased approximately 40 basis points versus fiscal Q1/2015. This decrease was primarily the result of structural wage increases and costs related to the startup and transition expenses associated with our strategic initiatives.

New Bakery-Cafe Development and AWS

During fiscal Q1/2016, the Company opened 17 new bakery-cafes and its franchisees opened 13 new bakery-cafes. As a result, there were 1’997 bakery-cafes open system-wide as of March 29, 2016. Average weekly sales (AWS) for Company-owned «Class of 2016» bakery-cafes through fiscal Q1/2016 was 58’883 USD. AWS for franchise-operated «Class of 2016» bakery-cafes through fiscal Q1/2016 was 51’641 USD.

Full Year Fiscal 2016 Outlook

Comparable Net Bakery-Cafe Sales Growth: The Company announced that Company-owned comparable net bakery-cafe sales in the first 27 days of fiscal Q2 2016 were up 4.4 percent. The Company raised its targeted range for fiscal 2016 Company-owned comparable net bakery-cafe sales growth to 4.0 percent to 5.0 percent, from 3.5 percent to 4.5 percent.

Diluted EPS: The Company raised its full year fiscal 2016 diluted earnings per share target to 6.50 USD to 6.70 USD, up 5 percent to 8 percent, from 6.33 USD to 6.52 USD, up 2 percent to 5 percent, when compared to full year fiscal 2015, excluding one-time items in both fiscal years.

Operating Margin: For fiscal 2016, the Company continues to expect operating margin will be down 50 to 100 basis points when compared to fiscal 2015, excluding the impact of one-time items.

New Bakery-Cafe Development and AWS: The Company continues to expect 90 to 100 system-wide bakery-cafe openings in fiscal 2016 and is maintaining its average weekly net sales performance target for new Company-owned bakerycafes of 45’000 USD to 47’000 USD.